Great site. Great Book. Great cause.

Full disclosure, I am a financial advisor and one of the reasons that I decided to work with a mutual insurance company over a brokerage firm is due to the power of a properly designed whole life insurance policy.

Some information that may help the more analytical minds is that:
1. A mutual company is a Subchapter L corporation. This means that distributions as dividends from the insurance company are already taxed at the corporate level, therefore as long as the dividends remain within the policy the policy owner gets access to the funds without a second tax. Even if the funds are withdrawn rather than borrowed, the gains are taxed on a FIFO basis. This basically means that the tax code favors insurance contracts and provides considerable advantages for mutual company owners. Here it is in legalese: http://www.law.cornell.edu/uscode/usc_sec_26_00000808—-000-.html
2. The power of ownership cannot be stressed enough. The policyholder is an owner of the mutual insurance company. In essence, you are growing your money within, and borrowing from, a company that you personally own. Think of it as a preferred stock-like investment that you buy into via premiums rather than shares, yet it’s complete with voting rights, and a death benefit to boot.
3. Leverage is power. The compounding within the policy regardless of outstanding loans (non-direct recognition) is your friend. Your money is buying more insurance while you are using the insurance companies money. How do you make money by borrowing at a higher rate than you are earning? Well, because of the volume of money being borrowed vs the volume of money earning interest. I’d be glad to show the math behind it. Yes, there is a break-point rate where the funds borrowed will surpass those earned. I usually show this graphically for my clients just to give them more comfort that they are not making a mistake by taking policy loans.
What are you invested in? An incredibly well diversified, conservative mix of investments, much of which only institutional portfolios have access to. Actuaries, the guys who make much of this activity possible, go through an absurd amount of training, testing, and study in order to make money for insurance companies and are paid handsomely to do so. Why not hire those guys to work for you as an owner, rather than having them work against you as a consumer? The slow money but sure money always bets with the house. Another plus is that insurance companies have the capital to hire the rockstars of the institutional investment world since they are overwhelmingly cash intensive. As an owner they are at your disposal.
4. Finally, the brunt of this concept is that you can recapture the money that you EARN/SPEND. The amount of money that passes through our hands in this country is astounding. This plan allows us to control our own individual household microeconomic environments by controlling the funding transactions of each dollar exchanged. Money is always made via financing in our modern economic environment because even cold hard cash is a “note” AKA a promise to pay, hence, even it is financed.

Thanks Pamela, keep this up!

2. When paying back a loan, does the total amount being payed back get credited
back to my account in the form of paid up additions or just the interest?

Thanks,
John

Thanks,
John

http://www.bankonyourself.com

http://www.bankonyourself.com/best-way-to-invest-money

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