Whole Life Insurance as a Foundation for Real Estate Investing

[Tom Jensen]

I’ve recently come across the concept of “personal banking” through “overfunding” whole life insurance policies and leveraging the cash value to buy assets.

In theory it sounds like a can’t loose situation. You have a savings account tax deferred that always generates growth & yields dividends. You borrow from yourself and pay yourself back.

Has anyone had any experience with this strategy - I’ve only ever heard bad things about insurance, but it sounds like a very smart financial base, especially if you are looking to build a massive real estate portfolio.

[John Perrings]

@Tom Jensen and @Paul Shannon,

Yes, it's a strategy that my real estate clients use. Think of whole life insurance as a place to store cash rather than an investment.

That cash can then be used to perform your real estate investment activities.

The benefit is that you do not have to liquidate your cash account (life insurance cash value). You can borrow against your cash to make the investment. Making $1 do the job of $2 or $3 dollars.

One clarification - you cannot borrow against your policy for free. You are borrowing the insurance company's money and they do charge you interest. But there are several benefits - one being there are no pay-back terms on the loan.

And of course it's all tax-deferred (or tax-free is used properly).

Hope that helps!