Have you heard about the Infinite Banking Concept, and you want to learn more? Or maybe you’re already using Infinite Banking, but would like to explain it better to your spouse, your parents, your children, business partner, or friends.
In part 1 of our series on Infinite Banking, we're unpacking the basics of policy design and what that means. You can view the first part of the series here: What is the Infinite Banking Concept? Part 1.
Here’s your cue to see what the fuss is all about… tune in now!
Table of contents* What is Specially Designed Whole Life Insurance* What Makes it Different from Ordinary Whole Life Insurance?* What is Base Premium?* What Are Paid-Up Additions?* What is a Mutual Company?* What is a Dividend?* What is the Difference Between the Policy Owner and the Insured?* Roles Are Flexible* Should You Buy a Specially Designed Policy or an Ordinary Policy?* Book A Strategy Call
What is Specially Designed Whole Life Insurance
What is Specially Designed Whole Life Insurance? The “special design” is dividend-paying, high cash value whole life insurance with a mutual company. This is the simplest definition, and we’ll break down the pieces and parts over the next few questions. This answer gives you something to come back to and ground yourself.
What Makes it Different from Ordinary Whole Life Insurance?
Essentially, ordinary whole life insurance is a basic policy that has a simple, non-optimized cash value component, and death benefit. With this type of policy, you only pay the base premium. A Whole life insurance product is a permanent, guaranteed insurance policy that lasts your whole life. However, if you are interested in using an Infinite Banking strategy, you’ll want to ask for a more customized policy. For example, you can either buy a policy with a stock company or a mutual company, which can affect your cash value growth. Similarly, you can also customize what you pay in premiums vs. paid-up additions, which affects your cash value growth. An “ordinary” whole life insurance policy may not grow cash efficiently, yet for Infinite Banking having a specially designed policy is important.
What is Base Premium?
The base premium is the minimum premium that you must pay in order to keep your policy in good standing. This premium is calculated by the underwriters who use actuarial science to determine your premium based on age, health, and death benefit amount.
Your base premium contributes to your cash value over time, just like mortgage payments contribute to your home equity.