The Infinite Banking Concept AKA"770 Account" - F.A.Q.'s
1. Should I start a policy if my income is less than $50,000 a year?
The Infinite Banking Concept/"770 Account" can be utilized for individuals and families of all income ranges. Traditionally, the Infinite Banking Concept (IBC) has been a strategy for the wealthy because there are no rules or restrictions limiting the amount of contributions like with a 401k/IRA.
At the end of the day, this strategy is all about the discipline of saving money. All families certainly stand to benefit from putting their savings where it is safe and can maximize as many benefits as possible both short and long-term.
One of the best long-term benefits of the 770 Account/IBC is the tax-free death benefit which can help improve a families wealth class from one generation to the next. Without this generational transfer, most families are left no better off than their previous generation. The short-term benefits are tax-favored contractual growth and liquidity. Everyone can and should have access to such benefits.
2. How much does it cost to get started?
There is no upfront out-of-pocket fee to work with the 770 Account/IBC Authorized Advisor unless an advisor charges a fee. JLM Wealth Strategies does not charge a fee for design or implementation and instead is paid a commission by the financial institution the advisor chooses for the strategy.
The commission is based on the annual base premium which for a 770 Account/IBC policy is typically a 50-70% reduction in commission compared to financial professionals who can offer a Whole Life contract without the proper design. The correct design will allow you to accelerate the cash values from day 1 by reducing the commission of the advisor and re-directing that money back to your account.
It pays to work with an advisor who can not only teach you how Infinite Banking works to protect, grow and transfer wealth, but also who is not concerned about fattening their wallet at your expense.
3. What is the minimum needed to open a 770 Account/IBC contract? What is the maximum?
The minimum is approximately $250 per month. I have clients who are putting well over $100,000 a year into their contracts.
These answers varies depending on the savings, cash flow, and assets of each person. It can be customized to fit your individual needs and wants.
4. Can the policy be canceled without penalty?
Yes, if you have the correct type of contract. The only type of cash value life insurance policy that does not carry a surrender charge period is a Whole Life policy. Universal policies typically have a surrender period of 10 years or longer resulting in a surrender penalty if the contract is canceled before the surrender period ends.
5. Isn't Whole Life more expensive than Term and Universal Life?
A 770 Account/IBC policy compared to a traditional Whole Life policy sold to the public has a much lower annual base premium. This design minimizes the death benefit and, therefore, the cost of insurance inside the contract. Not only is the death benefit minimized but the premium is guaranteed to never increase for the life of the contract.
(It is worth noting that since the death benefit is minimized, you are able to take dollars that would have otherwise supported a much higher death benefit and instead re-direct that excess money into a Paid Up Additions Rider which supercharges the cash value growth inside the contract. This design creates the most efficient way to accumulate capital within the contract while also providing you with a lot funding flexibility.)
Term life insurance policies offer only death benefit protection for a set period of time. There is no cash value to be accessed. Ultimately, the lowest cost policy over the long run are not term policies. Less than 2% of all term policies pay a death benefit.
All universal contracts contain a term "chassis". Essentially, you are buying renewable 1 year term insurance coverage for the rest of your life. The cost increases with age getting exponentially more expensive as you enter your traditional retirement years. This is increasing cost component is one of the reasons why no type of universal policy is endorsed for the 770 Account/Infinite Banking strategy.
6. What if premium payments cannot be made because of job loss?
In the event of a job loss, premiums still need to be paid. However, since the monthly required base premium is typically 50-70% less than with a typical Whole Life contract the public buys, cash value is building from day 1. Instead of the being the slow growth contracts financial entertainers like Dave Ramsey and Suze Orman lambast on a regular basis, a 770 Account/IBC contract has substantial cash values available to offset the inability to pay premiums in the event of a job loss for many years.
In the event of a job loss, the owner of a 770 Account/IBC contract will have 3 options to pay premiums: borrow from the available cash value, surrender death benefit, or utilize the dividend to offset payment.
Whole Life locks in the premium and guarantees that it will not rise for the life of the contract. Each year, the cash value is guaranteed to grow. With use of a Paid Up Addition's rider, the cash values will increase at an exponential rate allowing the contract to have a cash value equal to premium outlay sooner than with a traditionally designed Whole Life policy.
7. Is a health exam required to open a 770 Account/Infinite Banking contract?
Yes. A paramedical exam must be completed for the insurance company to full underwrite your policy.
The exam is usually takes 20 minutes and can be scheduled at the comfort of your home.
8. I have poor health. Do I have to be insured to be the owner of a policy?
You can be the owner of a life insurance policy and not be the insured. For example, a family member like a mother, father, child, grandchild, sister, and brother.
9. Is there an age limit to start a policy?
Yes, it varies on the insurance company. Typically, life insurance stops being offered by the 80th year of life. In rare cases, age 85 is the final year it can be purchased.
10. Can a 770 Account/Infinite Banking contract be owned by a trust?
Yes. We can refer estate planning attorneys who specialize in living trusts and advanced estate planning scenarios.
11. Can the 770 Account/Infinite Banking contract be split between different beneficiaries?
Yes. Also, beneficiaries can be changed in writing by the owner after the policy has been issued.
12. Can other assets/investments be re-positioned into a 770 Account/Infinite Banking contract?
Yes. Careful consideration must be given before the sale of any assets and investments. 770 Account/IBC policies can be designed to incorporate large inflows of premium.
13. When you pay yourself back, are you paying yourself interest?
No. First, you are not borrowing your own money. You are borrowing against the cash value you've built up in your 770 Account/Infinite Banking contract.
I would also add that "paying yourself back" or "paying yourself extra interest" are simply euphemisms to help explain the benefit of paying your policy loans back quicker. Additional "interest" you charge yourself on loan repayments will simply accelerate the pay back of the loan.
Once the loan is re-paid, the entire loan payment can now be directed towards the Paid Up Addition Rider of the contract. This strategy of "charging yourself more interest" is essentially a forced savings strategy meant to harness and reinforce the habit of saving money by capturing your newly created cash-flow before it can be diverted and lost forever to newly created expenses. This is referred to by Authorized IBC Practitioners as overcoming Parkinson's Law.
14. What is the difference between a mutual based and stock based life insurance company?
A mutual-based life insurance company is owned by its policyholders. A stock-based life insurance company is owned by shareholders and makes decisions that can benefit shareholders before policyholders.
Only a mutual based life insurance company is recommended for the 770 Account/Infinite Banking Concept.
15. What is the difference between a non-direct recognition vs. direct recognition dividends?
A non-direct recognition dividend is unaffected by an outstanding loan. A direct recognition dividend is can be reduced if a policyholder has an outstanding loan.
The amount of the reduced dividend reduction varies by insurance company and can be different each year.
16. Does your money grow faster with one large policy or multiple policies?
The compounding effect of large numbers favors larger numbers. That being said multiple policies create a pool of money. When all aggregated together this pool of money will compound annually in the same manner as one large policy.
Start funding your banking system by what you can afford to save comfortably. You can add more policies later health permitting. Should health be an issue, you can look at being the owner of a policy on someone you have an insurable interest in.
17. I am considering a 529 college savings vehicle for my child. Are there any advantages to starting a 770 Account/Infinite Banking contract instead?
First, giving your child the gift of life insurance locks in their insurability for life. With more children being diagnosed with autism, Children's Diabetes, and other heartbreaking illnesses, you have the ability to lock in a child's policy while healthy giving them more financial options later in life.
Second, the money saved in a 770 Account/Infinite Banking contract is protected from stock market loss. An IBC policy provides contractual guarantees and predictable growth every year. 529 accounts will fluctuate based on the performance of mutual funds offering no such guarantees.
Third, if your child decides to use the money for something other than higher education, the money in a 529 account will be taxed AND penalized. The cash value in a life insurance policy can be used tax-free no matter what the funds are used for. Never underestimate flexibility.
Fourth, unlike a 529 account, a life insurance policy is not considered an asset under the financial aid formula colleges use thereby allowing your student to potentially qualify for more grants or aid offered by universities.
Finally, giving your child the gift of controlling their financial future by the time they are a young adult will be absolutely priceless. Imagine if you could have had the benefit eliminating banks from your life at an early age?
18. Why didn't I start this sooner?
See the most frequently asked question about the 770 Account/IBC. Click here.
African proverb: The best time to plant a tree is 20 years ago. The second best time is today.
To get the process started with your 770 Account/Infinite Banking contract, please contact John Montoya at John@JLMws.com.
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