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Insurance as an essential asset

foundation

Banking with Participating Whole Life Policies

In our commercial real estate investment cases, it has become common for investors to directly borrow money from their own or their company’s shareholder-type dividend-paying insurance policies for investment. In traditional thinking, when presented with profitable projects, we often consider whether our own funds, bank loans, or private lending can support the investment. What we most frequently overlook, or even fail to consider, is that dividend-paying participating whole life insurance policies can also be used for financing. This method of raising funds is far superior to typical bank loans because you are borrowing money from yourself and paying interest to yourself. For this reason, wealthy families have established their own banking systems for themselves, their families, and their companies through a continuous stream of insurance policies. This approach also prevents them from missing out on good investment opportunities due to loan restrictions.

essential asset

Why to build Your own Policy pool

►Banks have the authority to freeze your accounts

Traditionally, people may consider banks to be the safest institutions. Even though big banks have set various withdrawal limits (such as daily ATM withdrawals not exceeding $500, and e-Transfers not exceeding $3,000), we keep most of our savings in banks. However, what you may not know is that in the documents you sign when opening a bank account, you have already authorized the bank, under certain specific circumstances, to withdraw money from your account to repay debts under your name without notifying you or obtaining your permission. Additionally, if the bank suspects your behavior is suspicious, they can freeze your account.

►Bank Failure and Financial Security

The sudden collapse of Silicon Valley Bank in the United States has prompted us to reconsider the safety of funds held in banks. While the Canada Deposit Insurance Corporation (CDIC) guarantees the safety of up to $100,000 in your bank account, what about amounts exceeding this limit? For insurance companies, all deposits and policies are protected by Assuris. If an insurance company goes bankrupt, the death benefit of a policy is guaranteed for at least $1,000,000 or 90% (whichever is higher); the cash value of a policy is guaranteed for at least $100,000 or 90% (whichever is higher), and the same applies to insurance company’s savings account and segregated fund guarantee. Moreover, properly structured insurance policies are protected from creditors’ claims. This is one of the key reasons why high-net-worth individuals transfer large amounts into insurance policies annually. Even if a bank freezes your assets or a court orders the sale of your property, a properly designed insurance policy and its cash value remain secure, regardless of whether the cash value is $10,000 or $10,000,000. This protection from creditors and the guaranteed coverage provided by Assuris make insurance policies an attractive option for asset protection and wealth preservation, especially for those with assets exceeding standard bank deposit insurance limits.

►Make money like a bank

How do commercial banks make money? The most basic way is through the interest rate spread: the loan interest rate minus the deposit interest rate. Additionally, banks can package and sell the funds they lend out and re-loan them, creating multiple profit streams from a single deposit. For example, if we, as regular depositors, deposit $10,000 into a bank and earn 3% interest income, while at the same time taking out a $100,000 loan from the bank for a project and paying 8% loan interest, in these two transactions, we first provide the bank with $10,000 to lend out, and then borrow $100,000 from the bank to pay interest and generate income for the bank. In this process of money flowing in and out, the bank becomes the biggest winner. A shareholder-type dividend-paying insurance policy allows you to become your own bank. Your money is stored under your own name to generate returns. When you need funds, you can borrow against yourself and pay interest to yourself, while your principal remains unaffected and continues to grow through compound interest. At the same time, this does not impact potential project investments. This is the famous Infinite Banking Concept.

►Tax-free and compound growth

Perhaps when you’re learning about dividend-paying insurance policies, you might think that a 6% dividend scale interest rate isn’t particularly exciting. However, if you’re an experienced investor who can fully consider the tax burden and volatility of other investments, you’d realize that the actual annual growth in cash value of a dividend-paying policy might require a stable 11%-12% annual interest income from other investments to match it.
This comparison highlights several key points:
1. Tax Efficiency: Dividend-paying policies often have tax advantages that other investments lack.
2. Stability: The growth in cash value is generally more stable and predictable compared to many other investments.
3. Compound Growth: The policy’s cash value typically grows on a tax-deferred basis, allowing for more efficient compound growth.
4. Risk Adjustment: When considering the risk-adjusted returns, the seemingly modest 6% rate becomes more attractive.
5. Long-term Perspective: These policies are designed for long-term wealth accumulation, where steady, tax-efficient growth can outperform more volatile investments over time.
This perspective underscores the importance of looking beyond nominal rates and considering the overall financial impact when evaluating investment options.

►Much more Liquidity

People who have experience with project investments understand the crucial role that loans play in a project’s success. They are also familiar with the limitations, complexities, and difficulties associated with obtaining loans. However, when you have sufficient cash value in your dividend-paying insurance policy, you’re no longer at the mercy of banks or other lending institutions when you need funds.
You can directly use your insurance policy as collateral and borrow the amount you need (70%-90% of the cash value). Banks don’t even need to check your credit history because your policy itself sufficiently demonstrates your ability to repay.
Of course, building up a policy with adequate cash value requires good planning and persistence. It’s similar to establishing your own bank, where you need to maintain good relationships with depositors (in this case, you and your family members through policy building and maintenance).
This approach offers several advantages:
1. Flexibility: Access to funds without strict lending criteria
2. Speed: Quicker access to capital compared to traditional loans
3. Privacy: Less scrutiny of personal finances
4. Cost-effectiveness: Potentially lower interest rates
5. Control: You determine the repayment terms
Building this financial structure takes time and discipline, but it can provide significant financial freedom and flexibility in the long run.

►Cash flow and retirement income

The key difference between a shareholder-type dividend-paying policy for building your own bank and a regular insurance policy lies in its design. The purpose of building your own bank is to allow you to have access to more cash value as early as possible for personal and business use. Therefore, in the initial design of the policy, we allocate different proportions to the early cash value based on your financial planning and future needs.
Each policy design has its own advantages and disadvantages, suitable for different groups of people.
The design for building your own bank is more appropriate for those who:
1. Want to find a safe investment channel for their funds and cash flow
2. Need to use these funds for investment or property purchase in the near or distant future
Of course, policies designed for building your own bank also provide good retirement income, striking a balance between short-term and long-term cash needs.

“The very first principle that must be understood is that you finance everything you buy–you either pay interest to someone else or you give up the interest you could have earned otherwise.”

R. Nelson Nash

Real World

Case Study of Banking With Your Own Policies

“It’s better to retreat and weave a net than to envy fish at the edge of a deep pool.” Rather than watching others’ insurance policy cash values accumulate exponentially, it’s better to take action yourself. Before taking action, let’s examine the practical uses of self-banking insurance policies in real life and how they can help you accumulate wealth.

Case 1

Build Condos

When Mr. G’s application for a construction loan from the bank didn’t meet his expectations, he inquired about the feasibility of borrowing against his insurance policy’s cash value. Mr. G successfully secured a $350,000 credit line by using his policy as collateral. This, combined with loans from the bank and other institutions, ensured the smooth progress of his project.Meanwhile, the cash value of his policy continued to grow. By the time his next project comes around, the amount Mr. G can borrow is likely to be even higher. After discovering the convenience of borrowing against his self-banking insurance policy, Mr. G applied for two more shareholder-type dividend-paying policies for his wife and daughter. His goal is to accumulate more cash value for future projects.

Case 2

Repay mortgage

Ms. S needed to apply for a mortgage from a bank, with a 25-year term for $200,000 at a fixed interest rate of 5.54% for five years. If she were to make payments as agreed for five years, she would pay a total of $73,526, of which $52,017 would be interest, and only slightly over $20,000 would go towards the principal.After consulting with us, Ms. S decided to borrow $200,000 from her existing insurance policy to pay for the house directly. Although the loan interest rate was 7.95%, by planning to repay it over five years, she would only need to pay $43,029 in interest, and the entire principal would be repaid. Meanwhile, the cash value of her insurance policy would continue to grow, with an estimated increase of $96,000 CAD.

Case 3

Purchase AMG GLE 53

Mr. W decided to purchase a Mercedes-Benz AMG GLE 53. The total price, including taxes, was $145,770, with a car loan interest rate of 8.04%. Mr. W felt the car loan interest rate was too high, so I suggested using his insurance policy’s cash value to pay for the entire vehicle, effectively paying interest to his own policy (self-banking) instead of the car company.The insurance policy loan interest rate was 6.7%. Using the same payment method and duration, this approach would save nearly $5,400 in interest. Additionally, the $145,770 in the policy would continue to earn dividends, with an estimated annual dividend of $5,000.Compared to a traditional car loan, over the five-year (60-month) period, Mr. W’s insurance policy loan approach would save him over $30,000 CAD in total.

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We offer sophisticated financial planning options that go beyond traditional insurance coverage, positioning insurance as a versatile tool for comprehensive wealth management and financial optimization.

We specialize in insurance financing and investment

  • Specialty: dividend-paying life insurance
  • Real-estate investment using life insurance
  • Off-market deals and information
  • Wholistic tax strategies to save money

Insurance as an Investment Vehicle

We utilize dividend-paying permanent life insurance policies as tax-advantaged investment tools.
These policies offer:
- Tax-deferred growth of cash value
- Potential for tax-free withdrawals and loans
- Safe and compound growth
- Estate planning benefits with tax-free death benefits

Corporate-Owned Life Insurance Strategies

We implement sophisticated strategies for business owners, including:
- Corporate Insured Retirement Programs (CIRP) to provide tax-efficient retirement income
- Key person insurance to protect businesses against the loss of critical employees
- Immediate Financing Arrangements (IFA) to fund large insurance premiums without tying up capital

Wealth Optimization and Tax Strategies

We help clients minimize tax liabilities and maximize wealth transfer through:
- Using insurance policies to create tax-sheltered investments
- Implementing strategies to unlock trapped corporate surpluses
- Structuring policies to protect assets from creditors

Investment Diversification

We give advice on using insurance products as a distinct asset class to:
- Hedge against market volatility
- Provide steady, predictable returns through participating policies
- Complement traditional investment portfolios

“The very first principle that must be understood is that you finance everything you buy–you either pay interest to someone else or you give up the interest you could have earned otherwise.”

R. Nelson Nash

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