Podcast Episode 43 Transcript

Episode 43: Infinite Banking: Learn How To Leverage Your Life Insurance Policy To Invest In Real Estate

Participant #1:
Somebody who puts a $1,000 a month will have about 500 in cash value they can leverage. And then somebody who puts in 100 would have about 50 in month one that they could leverage right around year two or three. That's when the dividends of interest start to kind of lift up the cash value and you start start to see a spike in the amount of cash value you have. So it's very common for us to see around year three. Your cash value, for example, $10,000 a year, year three put in $10,000. Your cash value grew by eleven or $12,000. In other words, the growth of the policy outpaces what you are paying in premiums in the insurance company.

Participant #1:
Welcome, everyone to the Prendamano Real Estate "PreReal" podcast. We're joined today by Sarry Ibrahim. I've been looking forward to this one for a bit of time, as I often kind of say at the beginning of these things, because this is something that I actually did in my own personal investing early on. But we'll get into all of that, folks. This episode has a lot of value. It's got a really unique strategy that will help you not have to be so dependent and reliant upon banks and financing. And we'll get into all the details. But before we do, let's welcome. Sorry to the show. How are we doing, man? Hey, James, thank you so much for having me out. I appreciate it. Well, we appreciate you taking the time out today. Sorry. He's got a pretty interesting resume here. He's the founder of the Financial Asset and Protection. Excuse me. Based out of Chicago. He's a licensed Bank On Yourself advisor and member of the Bank On Yourself organization. You operate in the life insurance space, right. And that's going to kind of be the focus of today's show. But before we get there, you're a young guy. You're enjoying a nice level of success. How did you end up doing what you're doing today? Yeah. Thank you for that. It started off when I was doing my master's degree in business about six years ago, and during that time, I worked at Allstate insurance. I was in insurance sales and helping clients with auto insurance, homeowners commercial insurance kind of a junior associate position. And then once I started to get the hang of problem solving and understanding people and more on a consulting people, I merged into Healthcare on the healthcare insurance side. So I worked with companies like Blue Cross, Blue Shield, Humana Signal Spring, and I was a Medicare broker. I was working with people specifically in Chicago who were working for the city of Chicago, and they were retiring, merging off of their employer plans and onto their own plans. So I helped them make that transition, finding the appropriate plan, the appropriate network, making sure everything was in alignment with what they needed and wanted. I did that for a couple of years. And then during that time, I started to build a good relationship with these clients. And during that time, one of my clients asked me if I could help him with life insurance. And he mentioned life insurance with cash value. And eventually the cash would pay for the policy itself. And I had no idea what he was talking about, but based on the way he asked about it, it sounded very appealing. It sounded like it actually existed out there. I just didn't really know where it was. I had my life insurance license at the time, but I still wanted to do more research. I told the client I would do research. I get back to him. One of the ways I like to learn is I like to read books. I went to Amazon, and I searched for books on life insurance. And then I Typed in life insurance at Amazon. Came across this book called The Bank On Yourself Revolution by Pamela Young. And the book talks about the strategy, the Bank On Yourself strategy. It's also known as the infinite banking concept. A lot of people, a lot of real estate investors know this is the infinite banking concept, and it is in basic terms the utilization of dividend paying whole life insurance for savings purposes and for financing purposes. And we could definitely jump into more of that. But that's why I wanted to be on the show today and to share this concept with you. All right. So there was a lot there. So I just want to break this down a bit because again, this was introduced to me in my early 20s by my brother. I had absolutely no clue what he was talking about, but I did it just because he was my brother. He was my older brother. And that's kind of what you did. But let's start with the two basics. So most people are familiar with term policies. So could you just spend a couple of minutes on explaining to the audience the term policy, and then we'll jump into whole life? Yeah. Absolutely. So in general, like you said, there's two types of life insurance there's term and then whole life term is a temporary form of life insurance. It has a set period of time, a start date and end date. So it might be ten years, 20 years or 30 years. It's only life insurance. There's no cash value or equity in it. So, for example, if somebody is four years old, they do a ten year term policy. By the time they're 50 years old, the policy expires, they have the option to renew it at a higher rate. But most of the time it's just that set period of time and there's no cash value. It's strictly life insurance only for that set period of time. So if they got a million dollars, ten year term policy for that ten year period, the insurance company will cover them, pay the beneficiary a million dollars if something happens to them, within that period of time, and then whole life insurance is the opposite. It's for your whole life. There's a start date, but not necessarily an end date. There's also equity that's building up cash value that's building up inside of the account. So when you're paying into the whole life policy, two things are happening. One is that you're paying for the life insurance. And the second is that you have, like, a savings account portion inside of it that you're building up infinite banking or the concept we're going to share today talks about growing the cash value part of the whole life policy over time. And again, it's for your whole life. It doesn't end. There's no end date to unless you pass away or cancel the policy. There's no end date to the whole life policy. Okay. So for the audience, a really great analogy I heard you use on a different show, folks, is essentially during a term policy. Think of it in real estate terms, right? It's essentially you're renting. You have the ability to have the policy for that period of time. Let's say it's a million dollars death benefit. And your payment is $200 a month. You're making that $200 a month payment. And as it was explained, there's a start and there's an end, very defined period. We took a ten year term policy out when we're 40. When we get to 50, the $200 a month you've been paying is gone. The policy is gone. God willing, you haven't passed away during that period of time. And that million dollar benefit that you were kind of hedging with and banking on in the event of God forbid, you passed away is off the table. There is nothing to roll over. It's just like a renter. When the time is up, you're out and correct. Correct. Precisely. Yes. Okay. Now enter the whole life policy. Now in the whole life policy, it's broken up into basically two sections. You still have a death benefit, right? Yes. But you also have a portion that's being invested by whomever the whole life carrier is into the markets, and you're building a cash value amount, which from what I recall, is tied to a schedule. So there's not a lot of guesswork in this, right? Correct. Yes. Okay. So, folks, if you had a million dollar term policy at the end of the term, it's over. If you have a million dollars whole life policy, the payments that you're making in part are being invested in the markets. And I know when this was first explained to me, I was like, well, if the markets go up, the markets go down, it can't really be a guaranteed dividend. It can't really be a number that you can rely on. And through the 2008 crisis, this was tested when big companies like Lehman up and disappeared. I was really nervous that potentially this would have had an impact on my whole life policy. And it didn't so I want to really go through this step by step. And if we can even maybe go through like a mock example. Okay. All right. So let's say I wanted to get a million dollars policy in whole life. So you still have the million dollar death benefit. But over the term that you're making the payments, how does that breakdown shake out? And what is a payment in whole life look like versus a payment in term? Because I know the numbers are significantly different. Yeah. Exactly. You're right. For example, if you were to take Term and Whole life and directly compare them, meaning a million dollars, for example, a million dollars in term versus a million dollars in whole life. On average, you could see about five times the difference. So a $200 a month premium for a million dollars on term would be about $1,000 a month on whole life, for a million dollars in coverage, depending on the age where the person lives and other factors like that. But in general, about five times. But now one question people say is, well, why would I spend five times the amount of insurance on whole life as opposed to term? And to answer that, those are two different functions. Term is strictly life insurance prematurely covering you from a premature death. Whole life is changing the way you finance things. Those are the two differences in a lot of situations. We do both we do term and whole life for clients, term to cover the death benefit and then whole life to change the way they spend their money and to change the way they finance properties as real estate investors, the way they lend money as hard money lenders, the way they run their business as business owners. It's changing the way the dollars fluctuate into your life. That's the main purpose for a lot of clients when utilizing infinite banking or utilizing cash value. Whole Life insurance. Okay. So again, folks, we covered a lot of ground there, and the stacking strategy that sorry prescribed or described is something that I did prescribe to. I wanted to make sure that there was a healthy level of death benefit. I'm married. I have two kids, but the reality was I needed to stay within certain confines when I took the policy. Right. So if it's a $200 term policy, think about for that million dollar death benefit, it's now $1,000 for whole life. But and there is a gigantic but as you're going through this whole life policy, folks, you're going to get to a point where the cash value starts to accumulate and it accumulates based on a schedule that it's unbelievable how accurate this has been for me. And there's a million different things you can do with the money. But we'll get there. Let's talk about the term of the policy. It's a bad way of describing it the life of the policy, right. At what point does the cash value start? To build up and really show legit dividends that you're able to access. Well, let's just start there. At what point does that cash value start to appear in the policy? So technically, the cash value appears from month one. Now, as far as how much cash that all depends on how much you're funding it. So, for example, I did my first policy, a small policy putting in $300 per month from month one, I had about $150 in cash value. It's about 50% ratio between premium dollars and cash value. Now, I've also worked with clients who put in, like, $100,000 a year. Those clients will probably have about 50 or $60,000 in the first year that they can leverage. So it depends on how much you're putting in. Of course, it's proportional. The premium dollars that you put in are proportional to the amount of cash value you have. Okay. So let's just pause for a moment there. So the cash starts to appear month one. Yes. And the ratio you had said was about 50%. Yes. Correct. So for every $1,000 payment that you make, $500 becomes available to access off Jumpstreet. Yes. Exactly. And if you make higher payments or if you have a higher schedule, the amount that's available is higher. Yeah. Exactly. Okay. Go ahead. I'm sorry I interrupted you. No worries. Yeah. So it's proportional. So if somebody puts $1,000 a month, we'll have about 500 in cash value they can leverage. And then somebody puts in 10,000 would have about 5000 in month one that they can leverage. Now, the beauty of this happening is right around year two or three. That's when the dividends and interest starts to kind of lift up the cash value and you start to see kind of a spike in the amount of cash value you have. So it's very common for us to see around year three your cash value. For example, if it's $10,000 a year three, you put in $10,000, your cash value grew by eleven or $12,000. So, in other words, the growth of the policy outpaces what you are paying in premiums to the insurance company. That's what we want to get to, of course, because we want to make this. We want to reposition the way that you finance things and we can get into more on it. But it's what happens when we have significant cash in the policy that changes everything. So there's never been a better time to cover this topic. Right. The banks are dramatically changing their underwriting requirements. It's becoming more and more difficult on the commercial side, especially. And by commercial side, I mean, retail, industrial, office buildings, even multifamily. The banks are really tightening up their underwriting guidelines. Folks, as we emerge from the pandemic, the banks are trying to hedge what's going to happen with the courts. Once the courts open back up, we're not sure what's going to happen with commercial tenants. Residential tenants. Will there be forbearance are they going to wipe the slate clean. There's talk about even abolishing confessions of judgments and getting rid of personal guarantees. These are all tools that investors have in the toolbox when they go to seek a loan. And the bank knows that these protections are there built into the leases, so they're willing to loosen up, if you will, the criteria when funding deals. So in layman's terms, this couldn't be a better time podcast, folks, because this whole life policy that sorry is talking about here gives you the ability to become basically your own bank. That's really what happens here. And we could do a side by side analysis at some point about points that you pay on the way in the underwriting process, all of the fees that are associated with traditional loans. It's not that type of process to access the cash, but we'll get there. So as you're making these payments, what determines the rate of return? That's where is that rate captured from as the cash value builds? Okay. Awesome question. So when we start the policy, for example, let's say you say, all right, you know what? Let's do a policy $10,000 a year for the next 20 years. The time I show you the illustration, the breakdown. All right, James, here it is. $10,000 every year is going to go into it. You have two columns. You have a guaranteed column, a guaranteed section, and then a non guaranteed section. The guaranteed section shows an average rate of 4% over the life over your life, actually. So I don't know how old you are, but let's say from age now to age 121, the cash value would grow by 4% average every year. That's guaranteed in writing and then backed by an insurance company that's been in business for over 100 years. And then the non guaranteed side is the same side. The guarantees plus dividends, because dividends are technically not guaranteed. But we work with insurance companies who have been providing dividends who have been paying dividends for well over 100 years. So again, not guaranteed, but very high likelihood of paying out dividends on the non guaranteed side. So it's non guaranteed side equals the guaranteed side plus dividends. So then with the dividends plus the guaranteed interest, you're looking at between about 5% to 6% compound interest over your life, not only the policy, but over your whole life until age of $121. Okay. So you said that this is backstop or guaranteed by the insurance company. Are there multiple insurance companies that write these policies or how does that work? Yeah. Good question. So that right now in the US, there's about 1200 insurance companies that sell whole life insurance. But this concept only narrows down to about four insurance companies. And the reason why is because there's a checklist that one must follow to be able to make sure this is actually going to work with them and actually help them out. So number one, it has to be from a mutually owned insurance company, as opposed to a stock owned insurance company. So mutually owned insurance companies give their dividends and profits back to the policy owners, the customers. Whereas stock owned insurance companies give their dividends back to shareholders. You want to make sure it's with a mutually owned insurance company. So that way you get those dividends back in your pocket. Number two, you want to make sure there's something called a paid up additions rider on the policy. The paid up additions rider is a piece you add to the policy, and it helps turbocharge the cash value over time. It also helps with flexibility. Some years you could pay less or more, but it helps with flexibility and adding more dollars in to be able to get more interest and dividends on that money. Not every insurance company offers a paid up editions writer. So you need to make sure they have it. Number three, there's something called direct recognition versus nondirect recognition. This is something that's really important because let's say, for example, you have $100,000 in cash value in your policy, right. And then let's say you're a real estate investor. You come across a deal. You need $50,000 to leverage. You go to your policy, you borrow $50,000 to use. If it is a non direct recognition company, your $100,000 cash value that you have will keep growing. Even when you borrow that $50,000, it keeps growing. It doesn't recognize the outstanding loan. It's a nondirect recognition company. If it's a direct recognition company, the opposite happens. They recognize that loan and may reduce interest and dividends on your cash value when you have an outstanding loan. So you want to make sure it's a nondirect recognition company. We talk about mutually owned, and of course, it has to be whole life. Some people say that it could be universal. I try to stay away from universal life. That's a whole other podcast episode just talking about universal life. But for the purposes of infinite banking and utilizing cash value life insurance, it has to be whole life insurance. Okay. So are you at Liberty to discuss which carriers meet all three? Yeah, absolutely. So the first one, we work with Lafayette Insurance Company. That's one company that we work with a lot. Number two, Foresters Financial, number three, Security Mutual and number four Mass Mutual. And do all of them hit all three of those benchmarks? Yes, they hit all those benchmarks. And they are heavily involved in our almost part of the bank organization. They bought into the concept. They've adjusted their products to fit real estate investors, business owners, high liquidity to have easy access to the loans. So they've kind of repurposed restructured their policies to adjust that we have. Okay. So you're at a point where you're evaluating who potentially you're going to write the policy with. They meet those metrics. We understand now it's a 4% guaranteed rate of return on the portion on the entire amount or the portion that goes into the cash value side of it. Yeah. So the cash value column grows 4% over the life of the insured. Okay. So we want to go ahead and we want to write a policy, right? First of all, it's for your life. Right. So things can go wrong. You can have good years and bad years. One of the pitfalls from what I recall when I was doing this, and part of the reason I scaled it back much more than I really wanted to was that if you get into a jam and you fail to pay the policy game over, correct? Yes. Correct. Okay. So, folks, as you're contemplating this, this is a situation where you could be down the line on a policy. Well, actually, that's a question. Let's say you're 25 years into the policy, you've accumulated a million dollars in cash value against the $3 million death benefit. What happens to the money at that point if you can no longer make the payment? That's a really good question. And a couple of things that we could do. For example, let's say that you are 40 years old. You say, I want to do $10,000 a year for the policy for the next 30 years. So at age 70, you no longer have to make premiums to policy. But let's say 25 years in. So by age 65, you've been putting in $10,000 a month and you have about let's just do even numbers, half a million dollars in cash value. But you can afford the last five years of the policy to keep paying into it. You can do a couple of things. One you could borrow from the cash value to pay for the premiums. That's one thing you could do. So hold on a second here so you can actually pay your premiums from your dividend or cash value from the overall cash value. Yes. You can take out a loan to pay the future premiums. Okay. Yeah. That's the best thing to do. Actually, that's the best case scenario, because when you do that, you don't interrupt the future growth and you control the payback period and the fact that you have that much cash value built up in the policy. And let's say you're 25 years into it. You only have five years left. You can stretch out that loan for the next ten years. Above that, you can pay the loan back in minimal payments for as long as it takes. This way, you don't interrupt the death benefit and you don't interrupt the cash value growth. That's the best thing the second option to do is you do something called reduce paid off. You change the policy from it being a 30 year policy to a 25 year policy. When you do that, you don't cancel the policy, you just reduce it. You shorten the life of the payments of the policy. But when you do that, you do interrupt the cash value. And you do lower the death benefit amount. So that's kind of the second worst option to do. So the number one, the best thing to do is take out a loan and pay down the future premiums. And the second is reduce paid up the policy. Okay. So in the event you had to take a loan against your cash value, what does that process look like? Do they look at your tax returns? Are they looking for the ability to repay? Are they running your credit? So I'll answer that in a general sense of what happens when you take out a loan in general, not just in this example, but overall, how does it work? And it's a very easy process. It's a one page document. And on there it asks for your policy number. It asks, how much money do you want? And you can borrow up to 90% of the cash value in your policy. So if you have $100,000 in cash value, they'll loan you up to $90,000, for example. And then the third question they ask you is, where do you want the money to go? Do you want it to be a written check mailed to you? Or do you want to directly deposited it into an account of your choice? No credit check, no personal guarantee, no collateral that you have to put up. It's a non recourse loan, and it's self collateralized, meaning the only collateral there is with this is the policy itself, nothing else, which works very nice. When you're a real estate investor and you're constantly going and borrowing money from yourself, you never have to qualify. You can get the funds in as little as three to five business days, and you never have to provide a reason what you're going to do with that money. How you're going to pay it back? And then you can pay back on your own terms. You could pay back on monthly payments, annual payments. You could make some monthly payments, some annual. You could even pay it back contingent on rental income that you're expecting. However, you want to pay back, it's on you as a mutual owner of the insurance company. All right. So, folks, we're talking about an example where you're borrowing from the cash value to pay dividends. But it's too exciting to not jump into the other side now. So we're going to transition, and I'm going to come back to an example of how this compounds. But you have been paying your policy. You're in year 15, 2025 30. It doesn't matter what year you're in. You have a cash value that you've accumulated. You've got your eye on a great piece of property in a highly competitive market like we're in today. You want to submit a bid on the property and you want to pay cash for it, or you want to put a deposit and seek traditional financing. Whatever portion that you have in your cash value up to 90% I think you said correct. Yes. Okay. So if I have my eye on a million dollar piece of property and let's say it's got to be a real quick deal. I've got a lot of competition, and I want to be able to write a check, but I do not have a million dollars in the bank. In fact, I don't have $10,000 in the bank in my policy. Let's assume I have a million one, a million, two in cash value. I fill out a one page document. Yes. There's no underwriting, no credit checks. There's no three years tax returns. There's no audited financials. There's no partnership documents you have to source from the seven different entities that you're involved in. Right. Well, this is the reality on my side of the table. And when you're in real estate as a broker or you're a $1,099, it is extremely difficult in good circumstances to access capital through traditional methods and institutional banks. Right. I've got 800 credit. I pay my bills, and I constantly and battling with the banks just because of the nature of my business to secure financing. So you have the ability, folks now to literally have zero underwriting. By the way, you're not paying an application fee, you're not paying a lender fee, you're not paying the appraisal fee, you're not paying a point in and a point out, you're not paying a prepayment penalty. You have none of that. You have the ability to go into your insurance policy and unlock your money like that. Correct. Okay. So you take that money out and you go ahead. And in that example, you proceed with your transaction. But let's talk about out of the box before we get into repayment. You mentioned something earlier. That is super exciting. Hard money lending right in my market. I've personally paid because of these issues before I got up to speed on the system that you're promoting today, I've personally paid 18 plus two. So I paid 18% on the note and two points, right. Because it was just such a great deal. And I rationalize why it was okay to pay 20% on the money that I was borrowing. You can take this money because, remember, not only is there no underwriting process, folks, you're not collateralizing this by anything, there's no need to have a piece of property that is debt free, or there's no need to put second positions and bridges. This is money that you can deploy at will based on your own underwriting criterion. So if there's a need in your market for hard money lending, you can pull this money out, make a hard money loan and keep the spread. Absolutely. With that. Can you talk a little bit about how much does it cost for me to access this money? And what is the interest payment? And how does that all work on the policy side? Yeah, absolutely. That's a really good question and good observation. This is exactly what banks do they borrow from one area and then loan it out in a different market and then keep the spread the difference in between it through lender financing or through borrowing from investors. So when you go to a bank and you borrow from them, that's not their actual money. They're borrowing their money from other places. And this is exactly what we show clients to do. They can actually, somebody could be a hard money lender. They have, for example, $100,000 in cash value in the policy. They borrow whatever they want up to $90,000 at 5% simple interest. And then they loan that out. Maybe, like you said, 18% like you've paid before 18% interest, and they keep the spread there. So they actually make money two ways. When they do this, they make money when they do the spread, the difference between 5% and 18%, that's one profit there or one way of making money. And the second way of making money is the policy, because it's a nondirect recognition policy. It keeps compounding. It makes money. So you're making money in the policy while it's working for you. And when you loan that money out, so it's two sources of income from the same dollars that you have. So again, just for easy numbers, I want to pull a million dollars in cash value out of my policy. Yeah. My payments are, I don't know, $2,500 a month that I have to my policy when I now pull that million dollars out. Yeah. I still have to make my $2,500 a month payment. Plus what? Just so I understand correctly, the $2500 is that to pay back the loan or that's the premium premium. Okay, that's the premium. So on a million dollars. Yes. What do I pay back? And what is it calculated off? Yeah. And just to be clear, you would pay the $2,500 back towards the policy and then 5%. So as you have an outstanding loan every month, you would get, like, a notice or statement. Now you have to pay the premium. That's not that you have to pay the loan back, but it's going to say, hey, you owe us $1 million insurance company, and then you could make a payment however you want. You could pay $1,000 back to it. You could pay half a million dollars back to it, however you want to pay it back. But it's calculated in 5% a year interest. So whatever that year is that outstanding balance for the whole year? Is that's how much you pay 5% interest on? So the 5% comes from where, though. Okay. So when you borrow that money, it's a personal loan from the insurance company. They're giving you a personal loan, leveraging your cash value as collateral. So let's say, for example, Forces Financial, that's one of the insurance companies we use. You're literally borrowing a million dollars from Forrester's Financial with having your cash value and your death benefit as collateral. Your insurance policy as collateral, but it's a loan between you and Forrester's Financial. Okay. And the 5% rate is subject to market conditions. Is that today's rate? How does that work? Yeah. So out of the four insurance companies I listed earlier, that's the rate they're charging right now. 5%. It is based off of obviously market conditions because of the low interest environment that we're in. Like, for example, 1990, a lot of these insurance companies used to charge about 10% interest on policy loans because interest rates were higher than they were today. Now, the flip side to this is sometimes when I work with clients, they say, oh, yeah. Interest rates right now are 5%. What happens if they go up while I'm using these loans? And that could affect me, right? Because it's going to be a higher cost of capital when you borrow. And it's yes and no. And the reason why it's yes and no is because one of the major sources of income for insurance company is charging interest on loans. If they charge more on loans, their dividends are going to go up, too. So back to 1000 1990, interest rates were high as well as dividend rates were also high for insurance companies. So the more that insurance companies charge of interest, the higher your dividends will be. So what sorry is talking about here is why? Because market conditions may cause a bump in the rate. There's actually a third component there. And the third component is you're going to be able to charge more on that hard money loan. Yeah, absolutely. So this rate is tied to market conditions 5% today for a loan that essentially has zero underwriting. Like, you'd have a line out the door and down the block to sign up for something like this. So we pull that money out with today's markets, we'd be paying about 5% back in interest. How long do I get to keep the money? Let's say I want to make a loan to our CMO over here in the corner. Pete, Pete says, hey, I'm going to go buy this strip center. I'm putting 30% down. I'd like to borrow $700,000. Okay, Pete, how long do you need the money for? I need it for twelve months. I want to stabilize. I'm going to do a refi cash out. You'll have your money back in twelve months. Okay. We get to month eleven, and whatever happens happens, we hit a global pandemic, delegate his homework. Pete can't pay me back in month twelve. Now I've committed to the insurance company that I'm going to pay them back. Did I guarantee when did I only take it for a year? You took it, and then you pay back whenever you want. You never committed to a time period when you were going to pay them back. So it's open ended. You can pay it back whenever you want. So if Pete needs that money for a longer period of time, I continue to collect my spread. Yes. And I'm not under the pressure of aligning my docs with Pete and my docs for the insurance company. Absolutely. Yes. Correct. You're not. Wow. Okay. So let's make this real simple. Pete wants to go borrow money today's rates. We're getting 13 plus 214 plus two. Let's say it's a 14% rate. And by the way, folks, just because you're not a quote, unquote bank, you are a bank. You could still charge those points. Right. You charge the points for the borrower on the way in, I'm going to go borrow from my life insurance. 5%. I'm going to lend it to Pete at 15%. I'm going to take a point or two up front, and I'm going to be making 10% on my money during the time that this money is out, correct? Yeah. Remarkable. Now I think you covered this, but I just want to make sure that I have it right. And the audience can digest this because I made this loan and I borrowed this money. Am I now messing up that original schedule of that 4%? Is my money still compounding because it's a nondirect recognition company? No. The money keeps growing whether you borrow it or not. So this really is a vehicle that is designed to allow foster encourage you to pull these proceeds down. There's not all penalties and craziness that gets lumped into it. Correct. Yeah. And I want to throw in one kind of special thing about this if you don't mind, it's asset protection. So the cash value in these policies is protected from outside credit risks and other people trying to sue you in a lot of States. You want to check with an attorney, check with your state. But for the most part, cash value life insurance is a protected asset, and that's really important for people who are business owners and real estate investors in high risk areas of potentially being sued. Cash value number one is not public information. The cash buy life insurance. And then number two, you can't leverage it or it's in a lawsuit. It's judgment proof. It can be leveraged in a lawsuit, which is really important to consider in today's world. That's one of the big things that we have to be concerned about, right? It's not just acquiring a nest egg. It's protecting it. Yeah. Exactly. Correct. Okay. So I do my loan with Pete. We close it out. It's a great transaction, or I go and I buy my piece of property. I refi cash it out, or I go ahead and I sell it. I pay it back. Now I come knocking on the insurance company's door a year later or six months later. How many times am I allowed to access this money as many times as you want? You can keep putting money in taking money out as you like recycling your dollars in and out on your own will. And as long as I'm making my payments, there's no penalties for going back to the well, no penalties. The only cost of capital on your end is the cost of interest of insurance company charges. That's the only thing you pay, no fines or fees or anything like that. Okay. Let's talk about if we can an example of how this money compounds, because I know when I was taking the plunge, it was something that I felt like I'm never going to get to a point where this is going to accumulate. And, you know, if I'm paying a thousand a month or whatever the number was, it's not going to be anything sizeable. And then you wake up 25 years later and wow, is it sizable? Do you have the ability? I know I'm kind of springing this on your last minute, but do you have the ability to take a look at the schedule and say, if you know, we put someone in a policy when they are 23 years old or 24 years old when they get to 45 or 50, what that would look like from a compounding perspective. Yeah. From the rule of 72, you would just take the 72 and then let's say it's 4% interest 72 divided by four and 18 years. Your cash would double in 18 years. So that's kind of one quick way to do this. So every 18 years, your cash would double. Utilizing the rule of 72. So whatever the amount is, that the portion that is being attributed to the cash value side of the policy. You can bank on doubling your money every two years, every 18 years. Sorry. Every 18 years, the rule of 72, every 18 years, your money doubles. Yeah, exactly. And that compounds I would assume when you get. Yeah, it keeps the compounding. So 100,018 years will be 200,000. Another 18 years will be $400,000. Another 18 years would be 800,000, and it keeps rolling. Keeps going. Wow. Okay. So let's say I signed up for a policy and I am paying $6 a month and I've had some good fortune. I've been able to grow my business and I want to increase what I'm paying. Do you have the ability to adjust the policy, or do you have to get a new one? It could probably be adjusted. So there's something called a modified endowment contract. A modified endowment contract or a mech policy is when it's a taxable contract. And one of the key advantages of utilizing the strategy is being on the tax favorite side. So we always want this to be a non mech policy or non modified endowment contract, and the insurance company sets a limit every year. So, for example, if you're putting in $10,000 a year, the insurance company will say you can add up to $12,000 a year, for example, without it becoming a modified endowment contract. So let's say, for example, in your case, you've been putting $1,000 a month into this policy 1015 years later, you're wondering if you can add more in, and the answer is yes. Probably you would contact your insurance broker. You contact the insurance company, you would ask them. Hey, how much room do I have to add in? And they might say you have enough room to add in an extra couple of $1,000 a year on top of what you're already paying up to the MEC limit. Once you exceed that Mac limit, then the policy now becomes taxable. Any gains you take out of the policy are taxed at your own your income plus 10% tax penalty if you are under the age of 59 and a half. In other words, the life insurance policy becomes almost like an IRA or 401K, which is what we don't want to happen. We want to stay away from that. Yeah, a huge advantage of utilizing this is the tax benefits that come along with it. So to stay within the tax limits, it has to be non Mac non modified endowment contract. And then following the limits. Now let's say, for example, you got more money, you have $10,000 a year limit. You want to add a few thousand dollars more plus another 10,000, then. Yeah, you would just do a second 3rd Ford fifth policy, which is very common to do. We do six month reviews with all our clients to see if we want to do another policy. A second policy, a third policy. Sometimes it could be a husband wife. The husband does one a year later, the wife does another one. That's what my wife did. I started one policy a year later. She's doing a policy. So a lot of people do that, too. And every year they're maxing out how much life insurance they can get. So that's exactly what I ended up doing as well. So let's talk about as we're accessing the money or just in general, do I have to go for a physical every year? Do I have to go for a physical every time I access the money? How does that work? Yeah, because it's whole life. There's only underwriting one time when you start the policy. So, for example, these are medically underwritten life insurance policies. So what that means is you have to qualify medically for the policies. Let's say today you do a policy, you do your medical exam. Once the insurance company says yes to approved, and then you start paying into the policy. You never have to do that again. For that policy, you might have borrowing money. Yeah. Borrowing, not borrowing. Yeah. Once you get in with the insurance company, you're in, you never have to qualify at all medically. Even if something does, God forbid, happens medically to you, you never have to justify that or worry about that even. But when it comes to new policies, every time you get a new policy, you do have to go through underwriting. Some insurance companies have accelerated underwriting where they just do like they would just take a look at your medical records. It's like 24 hours of underwriting. And then that's it a lot of times it's fully underwritten. That means it's like blood, urine and like a physical. That's pretty much one of the biggest downsides to it is the underwriting part. But once you do that, you never have to do it again for that specific policy. Okay. Now, when I'm borrowing money from my policy, it's a loan. So I'm not paying taxes, correct? Yeah. Correct. Okay. But what about on my death benefit? Your death benefit that goes to your beneficiary. It is income tax free. It's not subject to income taxes. It could be subject to other taxes, like a state taxes, depending on your state and depending on the federal rules behind that, something consolidated with your accountant about. But in general, death benefit is tax free. Okay. Sorry to pepper you with all these questions, but I'm trying to get as much in as I can, so the audience understands really what a comprehensive product this is. Let's say I hit retirement age, and I've decided that I don't want to take one giant chunk in one shop. Reverse mortgages was something that became popular maybe 1015 years ago. Do I have the ability to take distributions monthly or quarterly if I wanted to, to live? Absolutely. Yeah. So let's say, for example, you got a million dollars in cash value. By the time you retire, you can have it set up like a pension like account. It's not a pension, but it's similar to a pension where you just sit back every month, you're getting two or $3,000 a month, depending on how much you want and how much you and your advisor discussed. But you could sit back and say, I want $3,000 a month from now until the next 20 or 30 years from now, throughout retirement, I want this one. You can even increase it every year. And as you're doing that, you're also getting dividends and interest mixed in there, too, with your cash value. So it ends up being a lot of times. It's very common to do a policy where we're paying into it for 30 years, and then 30 years later, you're sitting back and then getting paid from the policy at a higher rate, about three times what you put into it. So if it's $1,000 a month for 30 years, you could do $3,000 a month for the next 30 years on a tax free basis. You don't have to pay taxes, income taxes on those $3,000 a month. In other words, three times your money, you wouldn't pay taxes on it. Wow. So how widespread is this method? How often are you coming across and seeing investors now utilizing these policies. So I've definitely been seeing a lot more traction around this because of podcasting, because of different real estate, especially a lot of real estate investors like to use this. It's definitely becoming more and more popular with social media and other factors. But there's still a negative connotation to a negative taste to it. Because of people. When they hear whole life insurance, they automatically think of a bad investment. And it could be if it's not structured the right way. Like we mentioned the checklist if it's not done for the right reasons. Yeah, it could be a bad investment. Like, for example, some whole life policies out there, they don't break even for 20 years. So you're putting money into in the first five or six years, you have no cash value at all. So you can be putting $1,000 a month into a whole life policy with no cash value at all, and it will take you. In other words, it's not liquid at all. There's no cash in it to do. Even if you cancel, you don't get anything back. And a lot of people, like 30 years ago were stuck in those policies. So a lot of people still have that lingering bad taste of whole life insurance being a terrible investment. And again, it could be, which is why you want to make sure you're dealing with an advisor that doesn't just have a life insurance license. An adviser that does this full time specifically utilizes cash value whole life insurance for savings purposes for financing purposes. You want to make sure that they understand how the loans work, how the liquidity aspect work? It's not just life insurance. If we want to just do life insurance only and nothing else, we would just do term and skip all of this. But again, we're not doing this just for the life insurance part. We're doing this more for the financing capabilities, the ability to finance without having to collaterize the taxes, the asset protection. That's what you want to make sure your advisor understands. So this has become again, for us, an incredible tool that I've used over, over and and over. I wonder, look, the longer you have this policy, the better it becomes. Like I said, you do wake up 20 years later and you're like, Whoa, where did this money come from? Right. At what point do you think age wise, you've kind of gotten past the point where it's going to be really a viable mechanism if you want it to be able to access the cash through the mechanisms that we've been discussing. It depends on how much you're putting into it. But for the most part, I would say about two to three years into it, you could start seeing some action and some things that you can actually do. And again, everybody has their own preferences, what they do. We always do a financial analysis with clients. We get an idea of what they want to do. So, for example, let's say somebody after a couple of years only has three or $4,000 to a real estate investor that might not be a lot of money to do. I don't know what you could do with three or $4,000, maybe just use for some of the closing costs or part of a down payment. But what if you have $4,000 in credit card debt? That'll be a perfect strategy to do. You can now replace your credit card debt with the debt that you own now. So you are financing with yourself, paying the interest back to yourself instead of paying that to another credit card company. So in other words, we could have different layers of success for different clients at different times. For that client who just replaced all the credit card debt with their life insurance. That's a huge win that they could do now, which is a few years of putting into the policy. Whereas real estate investor putting in a larger amount and then having 50 or $60,000 in cash value, then obviously there's more they can do there. So again, we kind of understand the client understand where they're at, where they want to go and to see how we can make this work. Probably the next two to three years, depending on how much cash they're putting in and other sources of funds. So sorry. Let me ask this in a different way. Is this an investment tool only for the younger generation if you're 40, 45, 50? Is it too late? Is this something that you would advise is probably not the best tool? Good question. I understand it now. Okay. The advantage of doing it when you're younger, somebody who's 2025 years old. The advantage is they only need to put in a few hundred dollars a month, maybe two or $300 a month over that course of the period to have longer compound growth. Now, somebody who's 50 years old or 55 years old putting in a few hundred dollars a month is not going to take them very far. But I still work with a lot of clients who are in their 50s and 60s, but they have larger amounts of money. So they might put in $100,000 a year for the next seven years. That'll make a substantial difference, too. So somebody who's at 50 years old puts in $100,000 for the next seven years by age 57. Then they can even turn on income from age 70. So that way they have a larger amount they could take out of at age 70 when they retire, if that's their retirement age. So to answer clearly, younger is definitely better for lower premium amounts and, of course, more suitable to their income. So somebody who's 25 years old might only be able to do two or $300 a month to save. And we would definitely recommend it. And then, of course, fast forward to age 50, 60 years old. It's going to be heavier premiums to make an actual substantial difference. Do you do actual like portfolio reviews? Let's say someone in the audience or I wanted to say, hey, I'd like you to take a look at my insurance policies and where I'm holding do you do a full analysis or are you just writing the Whole Life policies? Yeah, I always do a 60 to 90 minutes financial analysis before I do any insurance consultations at all. So I check everything they have already what they're currently doing, where they're currently at, where they want to go, and then we build the policy whole life policy, maybe one or two, even during the solution to fit their portfolio, because everybody's going to have a different situation. The insurance company that I mentioned earlier, they all have ten different products each, and each one has different funding requirements, so it's almost impossible to kind of guess which product and which company would be the best for the client. But the analysis, the financial analysis gives us a map of where to go. So, folks, again, this is a product that I use myself. It's a product that I've now set up for my kids. I have a 13 year old and I have a nine year old and I set them up with policies when they were two, three years old. And in our estate, God willing, I'm here to enjoy it with them. But in our estate, we prescribed essentially what and when they could access as they hit different milestones in life. I found this to be. And of course, everyone's got to check with their own advisors and attorneys and everything else. But for me personally, I found this to be such an unbelievable tool and setting the kids up this way. It gives me a lot of peace of mind knowing that when they get to the age where they're going to go to College or they want to buy a home, these are things that I know I can rely on. So sorry. What's the best way? If folks are interested, how do they get in touch with you? What's the best way to reach you? The best way is by going to our website. It's finnassetprotection. Com F. I. Nassetprotection. Com just to kind of give a little bit more content out there. I'll provide a free copy of the book Becoming Your Own Banker by now. Sunash now Sunash invented the infinite banking concept in the utilization of cash value, whole life insurance. And he wrote a book. It's about a 70 page PDF. So I'll send you that PDF if you reach out to our website at finassetsprotection. Com. I really appreciate your time today, man. Again, this is something I was excited for because we have used this. It's been a lifesaver in some instances, and it's been a great way for us to get that competitive advantage, secure deals and to monetize it in other ways. So I really appreciate you sharing this with the audience today. Oh, thanks, James. Thank you so much for having me on. I appreciate it. Absolutely. All right, folks. As always, we appreciate the questions, comments, concerns, keep them coming and everyone out there please stay safe.