So many pros and cons posts on the internet have a not-so-hidden agenda. They aren’t actually presenting both sides…
I do have an opinion on infinite banking, but for this post I truly did my best to clearly articulate both the pros and cons of this strategy fairly.
Let's get into it...
In our last post, we explored the very basics of this infinite banking concept.
In this post, however, I want to go into detail and explain the good and and the bad that come with it.
Infinite banking certainly has pros (you can hear about them all over YouTube), but it also has its cons (including some no one else is talking about).
Let’s go ahead and get right into it and start with the biggest con of the infinite banking concept...
Early Upfront Fees (Con)
The cash value growth is an important factor in making this strategy work long term, but getting money into your cash value comes at cost. This cost to you early on comes in the form of service fees, mortality expenses, and commissions to an agent.
This cost is most significant in the first years for two main reasons...
- Agent Commissions: the agent is paid almost all of their commissions immediately following the original transaction.
- Risk Pooling: the insurance company has to collect enough money for each specific group in order to cover the amount of risk that comes from insuring their lives.
Whole life insurance is particularly high compared to term life in this regard because they are guaranteeing a level premium for the rest of your life and guaranteeing a payout if you maintain that level premium.
It’s totally fair...
It’s insurance.
The risk early on is much more substantial considering very little has been paid in by the group, yet the total they could receive upon death is multiples of what has been paid in.
Though it would be nice if it wasn’t the case, it’s the government's incentives for families to have life insurance to cover the financial loss of losing a loved one that makes the pros of this strategy possible.
This is exactly why we strip our clients' policies down as much as we can, meaning we get the bare minimum death benefit so that we can take full advantage of the other benefits.
We pretty much treat our clients’ life insurance needs as an entirely separate concern.
This upfront co