What's the Difference Between Guaranteed vs Non-Guaranteed Cash Values?

 

Guaranteed Vs. Non-Guaranteed:  Understanding Whole Life Values

I'm to going to discuss the difference between guaranteed vs non-guaranteed values within a Whole Life policy, why having a foundation of guarantees is arguably the most important detail in setting up a “family banking system”, and revisit what distinguishes a contract from an investment.

Guaranteed vs Non Guaranteed

Guaranteed Values:  this is the year by year performance guarantee in detail out to endowment (typically age 121).  It’s based on math and actuarial science.  Life insurance companies provide a blueprint based on worst case projections should a dividend never be paid during your lifetime.  Something to keep in mind:  All the life insurance companies we use for IBC have been around for at least 100 years, are A rated, and most importantly to me, they have never missed paying a dividend… ever!  So the guaranteed values reflect a scenario of no dividends for the life of the contract yet it’s a scenario that’s failed to material even for one year.  Let that sink in for a moment.

You essentially have a fool proof system that is guaranteed to increase in value without any luck, skill, or guesswork during your lifetime.  No other place for money exists with the same level of guarantees that what you want to have happen, will happen, even if you’re not around to see it.  The last part of course speaks to the tax-free death benefit bestowed on your beneficiaries when you graduate to the next level.

Non-guaranteed values:  Take the guaranteed values and now add non-guaranteed dividends from the surplus profit of a mutual based life insurance company.  That’s it.  Life insurance companies are highly profitable but legally they cannot guarantee the dividends they will pay out next year or, 5 years from now, or ever.  By law, they have to project future values based on the current dividend scale.  They can’t assume interest rates will increase in the future and project higher dividends.  So the non-guaranteed projections are IMO conservative estimates of future performance.

The most important detail in setting up a “family banking system”

For banking purposes, this is a one of a kind “turn-key”, ready made financial system that is created with the purchase of a Whole Life policy.  IBC practitioners who have been around will recall that Nelson Nash was fond of saying: “Every time a person buys a life insurance policy they are starting a business from scratch.”  That business of course is a private family banking business between you and the life insurance company at what Nelson would call the “you and me” level.  

Of course, you do have to read between the lines of the contract to fully grasp the idea of Infinite Banking.  This is where the majority of people who first stubble upon IBC get stuck in the weeds.  They see a life insurance policy and get stuck.

I once heard Nelson say that calling this financial system a Whole Life insurance policy is one of the worst things the life insurance industry has ever done.  Right from the start, the life insurance industry provided a label that continues to confuse the masses to this day.  The smallest minds see life insurance policy and that’s all it will ever will be.  

Those of you who take the time to read Nelson’s book “Becoming Your Own Banker”, listen to our 30+ episodes now all related to Infinite Banking, and speak to an Authorized IBC practitioner, will realize what Nelson said from the beginning.  The Infinite Banking Concept is an idea.  It is not about life insurance.  It’s about controlling the banking function at the you and me level to root out rent seeking traditional banking system that will have you believing their “lies, lies, lies”.  

And what is the biggest lie of all?

That you need Traditional banks to finance all the major capital expenditures in your lifetime.  Simply not true but this of course is not what we are taught.  12 years of government schooling, 100’s of higher education degrees, and none of it teaches you the history of money and the importance of banking?

Why?  It’s about control.  Control the flow of money, create debt, and traditional banks have a client for life.  It’s parasitic relationship that need not to exist.

To bring it back to Guaranteed Values, a whole life contract provides the legal framework for a financial entity that is guaranteed to increase in value every year of your life.  The contract also provides you with guaranteed access to the cash values.  You can never be turned away.  

Imagine the peace of mind knowing you have posited your labor into a system protected by contract law, is considered an asset available for your use with no questions asked, and it is only solely by you.  Nothing else in the financial world like it.  No 401k/IRA or asset class can replicate the guarantees of a Whole Life contract.

Contracts vs. Investments

We'll refer to this as "Contractual" Wealth vs “Statement” wealth.

Statement wealth is when a client gives their money to an institution or organization in the hopes that they can get their money to grow. In this arrangement, the giver of the money assumes all the risk for the growth of the money. The organization sends a statement 1-4 times per year, telling them how they are doing at that time. 

Contractual wealth is when a client gives money to someone else as part of a contract. The recipient of the money assumes the risk.

Reminders:

IBC working is NOT predicated on dividend performance and chasing rate of return like you would with an investment.  It is a financial system, period. 

In order for a financial system to work, there must be a framework for money to move through it.  That’s what we are establishing with IBC Whole Life policies.  These contracts provide a framework for a financial system that allows you to control the flow of your money back to you where it can grow uninterrupted and so that we may continue to use that money repeatedly in our lifetime to build generational wealth.  

Think of it this way:  Instead of building beautiful fountains for the traditional banks, we can build our own.

If you have questions and would like to schedule a consultation with an Authorized Infinite Banking Practitioner, please visit the calendar here: www.IBC.guru

Thank you,

John Montoya

Here’s Why You Should Only Work with an Infinite Banking Authorized Practitioner

When you need to prepare your taxes, you go to your tax professional.

When you set up your living trust, you go to an estate planning attorney.

When you want to buy or sell a property, you go to a real estate professional.

Foot issues?  See a podiatrist.  Is your baby is sick?  Go to a pediatrician.  Kitchen remodel?  Hire a contractor that specializes in kitchens.  And on and on we can go.

If this sounds like common sense, it’s because it is.  The point is we seek out specialists in their field when we have specific goals we want to accomplish.  It’s the best way to assure that we get what want-- the best advice from experienced professionals.

When it comes to the Infinite Banking strategy, there are specialists across the United States who have completed the necessary training and been approved by the Nelson Nash Institute to teach and implement the Infinite Banking strategy properly.  You can find an authorized practitioner here:  https://infinitebanking.org/finder/

Here is why you should only speak to an IBC Authorized Advisor:

Whole Life insurance is a financial product.  Infinite Banking is a financial strategy.

There’s no end to the amount of incomplete information about life insurance on the internet.  

There are many life insurance options and no one size fits all.  Anybody who tells you should only buy a certain type of life insurance product probably isn’t qualified to be giving advice in the first place or have a professional agenda to steer you to something only they can offer.

The best life insurance product is the one that accomplishes an individual’s goals and everybody’s situation and priorities are different.  If obtaining life insurance protection is your goal, you should work with a professional who can educate on the pro’s and con’s of all the different life insurance products available. 

Pretty simple.

Taking it a step further, if you are interested in learning more about Infinite Banking, it’s important to know Infinite Banking can be accomplished with different financial products but none as well as a participating Whole Life policy from a mutual life insurance company. 

Definition of product:  an article or substance that is manufactured or refined for sale.

Definition of strategy:  a plan of action or policy designed to achieve a major or overall aim.

If you want to incorporate Infinite Banking into your personal financial picture, then you want a strategy, not a product.  To that end, you want a specialist who knows the field better than the rest.

In working with an IBC authorized practitioner, you’ll be working with someone who practices the strategy and can speak about their personal experiences.  They should be able to tell you exactly how they’ve used the strategy to build wealth.  If they can’t do that, they have not fully implemented IBC. 

Furthermore, any advisor can speak about a Whole Life policy but most advisors don’t even own a Whole Life policy let alone practice Infinite Banking.  Owning and practicing Infinite Banking with a properly designed IBC Whole Life policy is a world of difference!

In addition to the specific Infinite Banking training they receive, all IBC authorized advisors must own their IBC designed policies in order to be certified practitioners by the Nelson Nash Institute. 

   

It’s worth mentioning that not all Whole Life policies are the same and certainly not up to the criteria needed to be used for Infinite Banking.

Example, people who buy final expense whole life policies technically have a whole life policy but this is far different policy from the type of whole life policy an IBC authorized advisor would use for Infinite Banking.  Final expenses have little to no cash value growth and no flexibility or collateral capacity to use for banking purposes.

Another example are Gerber baby policies.  These are technically Whole Life policies but they are non-participating policies which means they pay no dividends.  They also cannot be used for banking purposes. 

Switching gears, it pains me to say that there are advisors who advocate and teach Infinite Banking but are not Infinite Banking authorized advisors.  They have not been interviewed by the Nelson Nash Institute, passed the necessary curriculum and gone thru the mentoring program to be approved as an IBC authorized advisor.   They contribute nothing to the community of advisors who have committed to upholding the highest levels of integrity to the public who are asking for the Infinite Banking strategy.

All IBC authorized advisors take very seriously a code of ethics to structure and implement only the correct type of Whole Life policies for the Infinite Banking strategy.  It’s because advisors were using the Infinite Banking name and peddling different recommendations that Nelson Nash created what was first called the Infinite Banking Institute, later changed to the Nelson Nash Institute by the board of directors to honor Nelson and his legacy.

My advice:  work with an IBC authorized advisor who is trained and vetted versus those who fail to meet the requirements and can potentially put you at risk by recommending policies that are not right for the IBC strategy. 

If an advisor is promoting IBC but is not a verified advisor on the Nelson Nash Institute website, you should ask him/her why that is.   

Action Plan:  3 Steps

1.      Connect with an IBC authorized advisor.  Get a high level overview and learn the basics of the strategy.  If it makes sense logically, request a customized plan.

2.      Complete a financial analysis with your IBC authorized advisor.

3.      Schedule an online or in-person appointment to review your IBC recommendations.  If the plan makes sense for you, start the underwriting process to implement. 

John A. Montoya

www.IBC.guru

JLM Wealth Strategies, Inc.

IBC® Authorized Practitioner

CA Life#0C42222

 

Buy Term and Invest The Difference?

There are consumers and financial planners who believe that buying term and investing the difference is the best way to buy insurance. For this particular crowd, I have a few more recommendations that fit with this strategy. Here are some other ways to save money and invest the difference. A Honda Civic instead of an Acura, Top Ramen instead of a sirloin steak, a bus ticket instead of airfare, an economical minivan instead of a luxury SUV, reading at the library instead of purchasing new books, and don't forget about brewing your own coffee instead of a trip to Starbucks.

As you can see, there are many ways to save money. However, when it comes purchasing life insurance I suggest you stick to the old adage: cheaper isn't always better. In fact, when it comes to buying term insurance, you'll be surprised to learn it's actually the most expensive option when looked at from a long-term perspective as the cost to renew coverage rises to unaffordable levels as you get older. Most people will assume that you don't need life insurance as you grow older and especially if you've "invested the difference". This is a common fallacy though. Don't forget that when it comes to buying term and investing the difference, human behavior will often get in the way. Rather than investing the difference, the greater amount of cash at hand will most likely go towards a new car payment, a dishwasher, vacation, or more dinners out. If the difference does happen to be invested, it can be prone to stock market loss, capital gains, and/or income taxes which drastically reduces the rate of return. For a real life example, check your 401k statements from the past year. Now imagine Uncle Sam taking an additional 25%-33% if you had to withdraw money for income! OUCH!!! And if you live in the great state of California like I do, don't forget about your state income tax of 9.3% of any income over $44,000! (Are you starting to understand why more than half the money you earn goes toward paying taxes and interest? Learn more at www.cashvaluebanking.com)

When you're analyzing the right type of insurance, it is important to buy the type of insurance that is appropriate for your future needs. If income from life insurance for survivors is truly a long-term (i.e., lifetime) need, the lowest net cost insurance, and the most stable investment, is permanent cash-value life insurance. Cash-value that builds in a permanent policy grows tax-deferred and withdrawals to the basis of premium dollars paid into the policy as well as policy loans are tax-free. This makes permanent life insurance a safe and alternative way to build a tax-free, long-term savings vehicle that plays a vital role in developing a successful financial plan.

Most people think of life insurance solely for it's death benefit. You may also be surprised to learn that a permanent cash-value policy provides living benefits in the form of tax-free withdrawals and tax-free policy loans at any age. This type of flexibility cannot be duplicated with any other financial product other than a Roth IRA (which allows for tax-free withdrawals after age 59.5). However, with a Roth IRA, you are limited in the annual amount you can contribute and as your income increases, you may become ineligible to contribute. Furthermore, most investments within a Roth IRA tend to be speculative (stocks, mutual funds, bonds) which have no protection against stock market loss. In comparison, cash-value policies except for variable universal policies, bear no market risk and is secured by the legal reserves of the life insurance company. To be fair, there are no home runs like with the stock market. However, slow and steady combined with tax-favored treatment can provide similar returns when adjusted for taxes and inflation compared to a diversified portfolio of securities, but with none of the stock market risk. I bet you can sleep safer at night knowing your money is protected, right?

Finally, the vast majority of death claims paid are those where the policy was permanent and the insured was older than 65. Since a term policy is designed to protect for a specific period of time of life, there is no guarantee a death benefit will be paid. In fact, the likelihood of a term policy paying a death benefit is minuscule. The percentage of term policies that pay a death benefit range from 3-7% whereas permanent life insurance pays a death benefit 100% of the time when kept to maturity. For my family, I like those odds.

If it is your goal to build long-term wealth that you can enjoy while still living and guarantee to leave a legacy to your loved ones, it is recommended you compare the true costs of term vs. permanent insurance and decide what is best for you. It is my opinion term life insurance is best utilized to protect a family on a tight budget and/or to satisfy a short-term need for protection of 15 years or less.

For more information on the type of coverage that best suits your needs or for an audit of your existing life insurance policy, email john@jlmws.com or call (800)208-6141.