All Forum Posts by: Thomas Rutkowski

 Borrowing against it, not from it ;)

That's how you can put your money to work in 2 places at one time.

 @Kegan Brenner

Leveraging the Cash Value of a Maximum Over-funded life insurance policy is a way to put your money to work in two places at one time. The naysayers don't know what they are talking about. You will make more money over time. It's not a get rich quick trick. It is a methodical approach to investing that allows you to earn a higher combined rate of return (Cash Value plus Real Estate)

@Dan H.

If you are using 100% borrowed money for a deal, it's an infinite rate of return. You have NO money in the deal.

 A life insurance policy loan is not your own asset. It is not a source of funds. The insurance company is loaning you THEIR money with your Cash Value as collateral. 

Using the Whole Life Policy (or Indexed Universal Life) is very powerful. When you borrow from the insurance company, it is a loan against your Cash Value. That means you can earn an infinite rate of return because you'll be using 100% Financing. Your Cash Value remains in the Policy earning dividends and serving as collateral for the loan. Your money is literally working in 2 places at 1 time.

The Cash Value of a Maximum Over-funded Policy is also a great place to park your Cash while you are looking for a deal. Dividend and Interest Crediting rates are over 6% right now. What you lose in fees is quickly made up by the higher rate of growth. It's also important to realize that the fees are minimized in a Maximum Over-funded Policy. These are not typical life insurance policies.

 Your money is literally working in two places at one time. Even though you take a haircut on the fees, you will accumulate more wealth over time. Would you rather have 85% of your money growing at 9% or 100% of your money growing at 6%? 

You're right. It's obvious.

 Leveraging the Cash value of a Maximum over-funded policy enables a savvy investor to put their money to work in two places at one time. The combined growth of their assets will exceed that of simply investing only with their own money. 

Who cares what the fees are if you're making more money?

You can keep your investments separate, I'm using my resources a little smarter.

 That is exactly how Life Insurance works. That is what enables you to literally put your money to work in two places at one time.

If you can't find the podcast you are looking for, there is a ton of information in this old thread: https://www.biggerpockets.com/forums/519/topics/245380-parad...

Policy design is everything. You want a Maximum Over-funded policy. When you look at the illustration, the 1st year Cash Value should be 85-90% of the Premium. If it's any less than that, there is too much Death Benefit. The high DB means higher fees and higher commissions.

 Hey Sam,

It's not true that "it would take years to borrow over it". Whatever it is that you mean by "borrow over it", it will be true with Whole Life or IUL.

It's important to understand that under the Hood, Whole Life and IUL are virtually identical. The only place they differ is in how they credit the cash value. A Whole Life policy allocates the net gain on their reserves to each policy as a dividend. In an IUL, they take what would have been the dividend and use it to hedge Index Options. The goal is simply to earn a little higher return than they would by paying a dividend. Crediting will vary year to year, but should exceed Whole Life Dividends over time.

If someone tells you that "infinite banking" has to be done with Whole Life, they don't know what they are talking about. They're just repeating what someone told them. It's a system to sell more insurance.

A max-funded IUL and a max-funded whole life should look the same. You should be able to lay one illustration over another, if the premium, age and risk are the same. The amounts of death benefit and Cash value will be relatively equal notwithstanding some small company to company variations in costs.

The only difference between policies is the way they are designed. Are they designed for high cash value i.e. Maximum over-funded? Or are they designed for high death benefit?

Pick the policy type based on your comfort level with dividends vs variable interest crediting, policy flexibility, and loan options. 

@Jacob Straussen

All agents are going to give you the same price for the same company. You'll want to make sure that you are looking at several different insurance companies. There are also a lot of great companies that don't put their products on those platforms, so there is something to be said for working with an agent rather than DIY. The prices are equal, and the service is free.