While tens of millions of investors chase popular dividend names on Wall Street, exposing themselves to volatility and the subsequent system of risk and reward, there is an easier, safer way to invest money. In fact, it’s so safe, even large banks are one of the primary users of whole life insurance.
Whole life insurance is essentially an account in which to keep cash wrapped in an insurance vehicle.
The “one percent” financial institutions and notable fortune 500 companies are all hoarding their money in 7702 whole life insurance accounts.
Also known as straight life or ordinary life, whole of life insurance is a life insurance policy guaranteed to remain in force for the insured’s entire lifetime provided required premiums are paid or the maturity date has been reached. The insurer will pay the death benefit of the policy to the policy’s beneficiaries upon his or her death. Whole life premiums are fixed, based on the age of issue, and normally do not increase with age. The insured party normally pays premiums until death, except for limited pay policies which may be paid in advance of 10 years, 20 years, or at age 65. Whole life insurance belongs to the cash value category of life insurance.
However, the point of using whole life insurance is not actually about the insurance; if you want life insurance for its own sake, you should instead buy term insurance.
Keep in mind, however, the vast majority of regular insurance agents don’t really understand how to set up whole life insurance policy accounts properly. In order to correctly establish an account, you really need to seek out the services of a specialist with the goal of receiving a 5% internal rate of return. When done right, whole life insurance is a way to build wealth strategy; the strategy is frequently used by those who are already rich. One even maintains full access to the funds all while they continue to compound and generate dividends from the insurance company.
There are several important advantages of setting up a whole life policy correctly from which you can benefit. These include:
1. Principal protection is guaranteed
2. You have full access to your cash
3. It’s lawsuit-proof (even from the IRS)
4. It’s private, unlike a bank or Wall Street
5. As a whole life owner, you will receive dividends from the insurance company
6. Internal rate of return is compounded at 5% or more
7. It’s tax-deferred
If this all sounds new to you, take your time now to do some research. For example, the book Bank on Yourself is probably the simplest instruction guide.
A quick overview of Bank on Yourself: Author Pamela Yellen is a financial security expert who details how hundreds of thousands of people of all ages and incomes have secured their families’ financial futures without dealing with the stock market or taking serious risks. Yellen describes a proven step-by-step plan for growing wealth safely, predictably, and guaranteed every single year regardless of the markets. Her system bypasses banks, credit card and financing companies so you can become your own source of financing.
An online source which many have found helpful and educational is Paradigm Life.
The biggest benefit to whole life insurance is arguably confusing and certainly the most complicated aspect of this type of policy account.
When a whole life policy has been done correctly, one can dual compound savings.
How does this work?
The cash value you have in your policy can be used as collateral, which means the insurance company will essentially loan you money without even really inquiring as to the details. Furthermore, they likely will forgo running a credit check on you because, if you default on the loan, they already have your cash and will just keep it. This is what makes you a zero-risk borrower.
Just as clarification, in this process you are NOT borrowing from yourself; you are taking the loan out from the insurance company and often at a very competitive rate at that. Today, the interest rate is usually around 5%. This loan will not even require any scheduled payments since, as long as you keep your policy current, the terms of repayment on the loan are left to your own discretion. As a result, these policy loans offer you a chance to supercharge your compounding strategy as if on steroids.
Once the loan request is officially processed, you can use the money they’ve loaned for whatever you want.
The recommendation of industry experts is to use it to buy more income. Use the income generated from your new investment to pay your policy loan off on your own schedule and benefit from essentially spending the same dollar twice.
For example, to make this concept simpler, you can deposit $10,000 into a whole life policy and take advantage of the safety of principal protection and guaranteed growth while, simultaneously, you could use the same $10,000 as collateral with the insurance company for a loan of $10,000. You can then take the $10,000 loan you’ve just received and use it in a PeerStreet.com or LendingClub.com account where you would receive an 8 to 12% yield.
Using the income to pay down the loan while also taking advantage of having this additional yielding investment is a solid strategy.
Compound interest is the addition of interest to the principal sum of a loan; in this case, the load is taken out against the whole life insurance policy. In other words, compound interest is interest on top of interest. It is the result of reinvesting interest, rather than paying it out, so the interest in the next period is earned on the principal sum plus previously accumulated interest.
Combining the accessibility of the whole life insurance policy with compound interest is a proven strategy to accrue funds without the serious risk and volatility of the markets.