Whole Life Insurance as Collateral

[Shanna Bechtel]

Hello investors! Many of you talk about borrowing against a self directed IRA. I have no such thing but in studying creative financing, I heard about borrowing against a life insurance policy. I have not accrued much cash value yet, but the face value of my policy is $100k. Does anyone have experience with borrowing against life insurance? There is a way to sign over rights to a policy to a third party as long as payments are made. I learned that while studying for my license. Would like to hear from those of you with experience!

[Wayne Smith]

@Shanna Bechtel This is what I have researched ... http://reviewopedia.com/workathome/infinite-banking-concept-reviews-legit-or-scam/

[Shanna Bechtel]

Thank you Wayne Smith for your input!

[Thomas Rutkowski]

Hi Shanna - I specialize in the design and sales of policies optimized for leverage. You can find a ton of resources on our website. 

First off, the policy must be a permanent life insurance policy: either whole life or universal life. Each has its pros and cons. The policy needs to be funded right up to the legal limit for what constitutes life insurance vs an investment in the IRS's view. All 50 states include language in their insurance statutes that require insurance companies to make loans to their policy holders secured by the cash value of those policies. The key here is that these loans are the insurance company's money, not your cash value. You are not "banking on yourself". You are paying interest to the insurance company for the use of their money.

The beauty of this is that it allows you to put your money to work in two places at one time. If you spend some time researching this, you'll find that this will build more wealth and create more tax-free retirement income than by using SD-IRA. Overfunded policies do not have contribution limits like IRA's either. You have to have a legitimate need for the insurance death benefit, but other than that, you can put as much premium into a policy as you want.

Be wary of infinite banking and other gimmicky systems. The interest you are supposedly "paying back to yourself" is really just you putting more premium into the policy via paid-up additions. An optimally designed policy shouldn't have any room left for additional premium under the IRS rules. If this doesn't make sense, I'd be happy to explain it to you privately.

[Shanna Bechtel]

Thanks Thomas. I have a whole life policy that I just set up 2 years ago. I'd like to invest without using a whole lot of cash first but it's good to have the option.

[Cliff H.]

No XP using WLI as leverage, but did a ton of reading on the topic of dividend paying WLI a few years back. Ultimately not for me, but some useful breakdown on the topic below.

Con
http://whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance

Pro
http://www.seekingalpha.com/article/981891