One of the scariest things for me is trusting people with my money. I’m a huge skeptic, especially when I know someone stands to profit from my business.
Don’t get me wrong, I’m not crazy, I’m fine with someone getting paid to help me, but I hate not knowing if I’m actually getting the best or if they’re just a really good salesperson.
And, unless it’s my area of expertise, I don’t even know the questions I need to ask to figure that out...
By the end of this post, you’ll be equipped with the right questions to ask your agent so that you can avoid being like the vast majority of others who end up getting stuck with an underperforming policy that they plan to have for the rest of their life.
At this point I am assuming you have weighed the pros and cons and believe that the infinite banking strategy at least has the potential to be a good fit for you.
In my last couple of posts, I warned of the lies that you've more than likely heard from experts as well as some of the things that almost all agents just don’t fully understand.
In those we discovered that both the carrier and the agent have a huge impact on your performance.
Throughout my career of helping my people find the absolute best ways to structure their policies, I've found myself repeating the same words of caution over and over again...
For that reason, we put together a PDF pinpointing the 14 questions you should ask to ensure you’re getting the absolute best!
You may be familiar with some of them, and that’s great. But, I know there are some questions here that most people haven’t heard before and yet could make a significant impact on the long-term growth of your policy.
In this post, I share 6 of those 14 must-ask questions.
These 6 stand out to me as the most complex and most overlooked; I think you’ll find them pretty interesting.
Let's start with Question #4 on the list...
What Is the Policy Loan Rate?
The easiest way to access your cash value from your policy is through a loan from the insurance company.
Without good terms to this loan, it can defeat the purpose of this strategy and take away the value of being able to freely take policy loans without negative repercussions.
As of this recording, 5% is pretty standard for an insurance company’s policy loan rate.
I have seen lower, but I have definitely also seen much, much higher.
If I were just getting started with IBC, I wouldn't take a policy with a company where I couldn’t easily get access to my cash value for 5% or less.
The reason this is important is because your cash value should be yielding you a large enough return to cover the cost of the interest on your loan plus (ideally) more.
Question #6 from the PDF is...
What Is Their Current Dividend Rate?
Insurance companies’ dividend rates vary widely throughout the industry.
They’re one of the key factors in choosing a great company. This is where you will start to really find out if the carrier you’re considering is top-tier.
At the time of this writing, several of the best-suited companies—those that will pass our PDF's 14-question test—will also carry a 6%+ dividend (or at least be very close).
You may select a carrier that is better suited for your goals that doesn’t have quite as high of a dividend rate—that can be fine as long as there is a clear reason to do so.
I, personally, haven’t yet found a reason to go with a dividend rate lower than 5.65% (as they stand today).
Unfortunately, this dividend rate is not the only factor you should consider when comparing the rate of return between policies. Nonetheless, 5.65% is a benchmark that I’d personally try to stay above.
On to Question #7...
Could I Get a Copy of My Illustration?
I would like to think that this is the most straightforward question of them all, yet it is certainly overlooked...
I’ve talked to a couple agents who won’t provide this type of information for their clients without an up-front fee—this fee can be upwards of $500!
That all seems a bit over the top to me...
Your illustration will project out the future values of your policy, including the guaranteed and non-guaranteed (where they’re adding in their dividends) cash value returns, the death benefit, contribution amounts, etc.
Having access to this information, is useful for you in the next question I cover here (as well as the last).
PDF Question #8...
At the End of Year 1, What Percent of My Total Contributions Will Be Available in My Guaranteed Cash Value?
This is another place where most of the policies you’ll be shown by most of the agents out there will fall short...
The reason you want to ask this question is to verify that the agent isn’t trying to structure your policy to a 'good enough' standard in order for them to make extra commissions.
Obviously, there are a lot of variables at play here, but with most of my clients we are able to get this value to 80% or higher.
To calculate this on your own...
- Take the End of Year 1 Guaranteed Cash Value amount from your illustration.
- Divide that by your Year 1 Premium contributions.
- This will give you a decimal that you can convert into this percentage that we’re talking about here.
Almost every agent that learns some version of the infinite banking strategy is taught (as was I) to get this number to just 60-70%.
As long as they can get it in this range, it’s considered 'good enough.'
It’ll look good enough to persuade most unsuspecting clients and the agent will get paid roughly 3 times more than if they had actually structured it in your absolute best interest!
Bottom line: a lower percentage here means less cash value—less money available for you—throughout the entire life of your policy.
In What Circumstances Would My Contribution Amount Be Restricted to a Lower Amount?
If you ever make reduced premium payments to your policy, insurance companies can lower your maximum allowable contribution in the future.
The points in time throughout the life of your policy at which they will make that adjustment changes with most carriers (for example, Years 1-5 may be different than Years 6-10 and so on).
You don't want to be caught off guard by a change like this.
Most agents won't know the answer to this question off the top of their head, or even worse, may blindly tell you that it is not the case...
When you consider these restrictions, you could very well be blindsided in Year 5 when a restriction hits because you happened to make less-than-your-maximum contributions for a couple of months in Year 1 or 2, for example.
I do want to clarify that I do not typically find it wise to start a policy at a target amount that is beyond what you think you can comfortably commit to—whether that’s $250/mo or $100,000 a year...
I actually have a couple of unique strategies our clients use for finding their inefficiently used funds to start a policy that they know they can commit to on a regular basis. We rarely change their current spending—we simply look at where they could better allocate their money.
I’ve watched a lot of videos and read a lot of material on infinite banking, but I actually don’t think I’ve ever seen anybody discuss some of these clever ways we find cash flow within your current budget.
That'll be coming out next week!
And the last question on the PDF is Question #14 (it comes after approval of your policy)...
Could I Get the Revised Illustration to Review the Final Numbers?
Before it's official the insurance company (or the agent) is supposed to present you with your policy for you to approve.
Before signing, double-check to see if the cash value growth has changed. If it has and no longer makes sense, you can 'reject' that approved policy and get a full refund.
Keep in mind, illustrations often change after the health information is collected.
Just because you have made it this far in the process does not mean you should still proceed if things have changed since what you were originally anticipating.
There may still be better options out there for you!
All of the questions in this post were focused solely on making sure that you are getting the very best policy. Again, this was just 6 of the 14 questions—although the others are more straightforward, they are equally as important.
The other thing that I personally would factor in is the agent that you are working with... Are they actually going to be helping you and working with you on implementation long term (like we do with our clients here at Spicer Capital)?
Just make sure you know what to expect and that you find whatever will work the absolute best for you.
That's why we created this PDF—to help you navigate the complexities and get the best policy possible. Oh and I’ve also included in that PDF 3 additional questions that my-paranoid-self would be asking before making any sort of commitment to working with somebody.
I hope you find them helpful as you make this important financial decision!
If you haven’t already, go download that PDF and let me know what you think in the comments!
The best way to stay on top of the content and resources that we provide on a regular basis is to subscribe to my channel, hit that notification bell, and check out our online community where Stephen and I talk about infinite banking as well as other investment strategies.
Until next week…