What the financial gurus think they know about Bank On Yourself that just ain’t so

Dan Kennedy

One of my most influential mentors (Dan Kennedy) says,

If you don’t offend somebody by noon each day, you’re not doing much.”

So I want to thank Danny Snyder, whose post to this blog you’ll find below (exactly as he submitted it), for confirming that I am indeed doing something:

First of all using the words “money on steroids” immediatly [sic] puts you in the liar and non-trustworthy category. If you put in $5314.44 and your cash value is $2937.18 you need some ritilin, you are A.D.D. Dave Ramsey (who is in a category way above the likes of you and Suze Boreman) knows of what he speaks. Millions of people have changed their lives due to Dave’s advice. You need to tread very lightly, if you want to succeed and prove yourself. Think… before you tear down people you do not know. I do actually Bank on Myself.

Your [sic] a scam!

Danny Snyder

On this website, I have stated that I agree with many of the basic principles taught by the financial “gurus” like Dave Ramsey and Suze Orman.  And I know they have helped turn around the financial lives of many.

However, there are two critical areas we differ on…

1.  That you must risk your money in the stock market to grow a substantial nest-egg

2.  That any kind of whole life insurance should be avoided

Dave and Suze (and many others) insist that investing in mutual funds is the road to wealth.  Suze insists in her latest book that “only stocks offer the potential for inflation-beating gains over the long term.”  However, research shows that’s actually the road to financial insecurity.

The reality is that the typical equity mutual fund investor managed a 3.49% annual return for the past 20 years, outpacing inflation by less than about 1% per year!” 1

Suze neglects to mention that investing this way also has the potential to dash your dreams of retirement and financial security, as so many Americans have discovered.  Suze wants you to do what she says, not what she herself does.  She has admitted to the New York Times (and elsewhere), that she only has 4 percent of her $25 million of liquid assets in the stock market, because, “If I lose a million dollars in the stock market, I don’t personally care.”

Suze Orman has only 4% of her portfolio in the stock market

Dave and Suze – and most other “experts” – insist whole life is a horrible product.  But what fries me is that, when asked about Bank On Yourself-type policies, most of them typically dismiss it with some variation of, “Oh, that’s just another way for life insurance agents to try to put a sexy wrapper around something that’s a waste of your money,” without even taking the time to learn the facts.

Suze Orman has only 4% of her portfolio in the stock market

Anyone who takes two minutes to look at the policy statement examples on my post challenging Dave and Suze to a debate will realize that Bank On Yourself policies are a totally different animal from the kind they know about.

I supposed it’s not really their fault that they don’t know how a Bank On Yourself policy works or how it’s different from the ones they know about.  Out of more than 1,500 life insurance companies, only a handful even offer a product that meets all the requirements and has all the features needed to maximize the power of the Bank On Yourself concept.

As a result, this type of specially-designed type of dividend-paying whole life policy isn’t even covered in the training programs financial representatives are required to take to get licensed.

Also, financial representatives who design and implement Bank On Yourself-type policies have their commission slashed by 50-70% to do so.  Many aren’t willing to do that.  Which is another reason most financial representatives won’t tell you about this, or will try to steer you to another more profitable product.

But don’t you think these experts should get the facts before pronouncing judgment?

Regarding Danny’s comment above that I need some “ritilin” if I paid $5,314 into one policy in the first year and only had $2,937 of cash value at the end of the year:  You missed the point.

I showed that statement to demonstrate that Dave, Suze, et al., are talking about a totally different policy from a Bank On Yourself plan.  They talk about whole life policies that have no cash value at all in the first few years.  But due to little-known riders that are added onto the policy, a Bank On Yourself policy has cash value in the first year (and even in the first month), and can have up to 40 times more cash value you can use, especially in the early years of the plan.

And, as I noted, no – you don’t get back every penny of premium in the first year, because there are no magic pills, folks.  There’s a cost for all the benefits, advantages and guarantees you get with a Bank On Yourself plan (including the fact that the company will pay out the full death benefit of the policy, even if the policy owner dies after making only one premium payment).

Think of it as a start-up phase.  It’s a one-time requirement that pays a lifetime of benefits.

Road to Retirement

And I wonder why Danny ignored the other (older) policy statement that shows how much one of my policies went up during the same period that the S&P 500 plunged by 40%?

Road to Retirement

All my principal and all my previous gains were locked in!

The plan grew by a guaranteed amount plus I received a dividend.  Just as has happened every year for more than 160 years.  More than 500,000 Americans already use Bank On Yourself for true financial peace of mind. And famous people including Walt Disney and J.C. Penney have used this method, too.

The fact of the matter is that if it weren’t for Bank On Yourself, we’d be in he same boat as most Americans, wondering if we’d ever be able to retire, and what we’d have to give up in order to do that.

As the philosopher Arthur Schopenhauer noted,

All truth goes through three stages:  It is ridiculed; then it is radically opposed; and only much later will it be accepted as self-evident.”

To find out how adding Bank On Yourself to your financial plan can help you reach your goals and dreams, and for a referral to a Bank On Yourself Professional (a life insurance agent with advanced training in this concept) who knows how to structure your policy correctly and can show you how to use it to become your own source of financing for all your major purchases, while growing a nest-egg you can predict and count on, request your free Analysis today.

1. DALBAR’s 2012 Quantitative Analysis of Investor’s Behavior


  1. You are completely full of CRAP! You claim “The reality is that the typical mutual fund investor has actually been losing 1 percent per year over the last 20 years, after adjusting for inflation”. WRONG. The S&P had an average annual rate of return of OVER 6% from Dec 31, 1988 to Dec 31, 2008 (it went from 277 to 903), so all you needed to do was just invest in simple index funds to WAY outpace inflation, and that’s when your end date is “cheerry picked” to be in a trough. If your end date was the end of 2007, or I bet if it is a couple years from now, your annual return would be higher than that.

    Also, picking on Suze for putting a small % of her money in the market — I’d do the same thing if I had 25 mil and was financially set for life. If I could live off of a 100% safe annuity @ 5% of that 25 mil (that would be $1.25 mil, and I think I could live off that annual income), I wouldn’t mess around with the stock market either. It’s a simple risk-reward thing, and people like you don’t seem to want people to understand that concept. You simply are not going to get big returns without considerable risk. That’s one of the most basic principles of economics. I am so angry that scam artists like you are taking advantage of scared people who just lost a lot of money in the market that is very likely to be a temporary loss, given close to 100 years of stock market history.

    This comment was so juicy, I decided it was worthy of its own post. – Pamela Yellen

  2. The example in part 2 of “What the experts don’t know . . .” states that the policy cash balance increased by $7,230 during the previous year (above what was paid in as premium). Assuming that the starting cash balance was about $116K and the yearly premium amount was $4,975 ($12,205 – 7,230), the annual return on that $116K was 7230/116111, or a little over 6%.

    That certainly beats -37.7% for the S&P last year. But my question is this, what would be the effect on the B.O.Y. rate of return in a more typical year, where the S&P is in positive territory?

    A different way to ask that question would be, is 6+% a fixed rate of return, independent of market fluctuations, or is it variable? And if the latter, what is typical variation, and what factors affect its value?

    • For the one-year period covered by this statement (for the year ending January 31, 2009), the S&P 500 was actually down 40%.

      Keep in mind that NONE of the principal was lost during the market crash, and ALL growth credited to the plan since day one was also locked in.

      Most people today have lost somewhere around 50% of ALL the principal AND growth they accumulated in any accounts invested in the stock market.

      The growth in a Bank On Yourself-type policy is not set at a fixed rate, like the rate you get on a savings account or CD. Instead, the growth is both guaranteed and exponential, meaning it gets better (more efficient) every single year, simply because you stuck with it (and slept like a baby!), rather than jumping from one stock, fund or investment to another.

      The example below shows the exponential nature of the growth in one of these policies. Please note that it’s based on the current dividends, which are at historic lows. If the dividends increase, so would the value of the plan, of course.

      And to get the kind of result you see below requires no luck, skill or guesswork (other than making sure you work with a knowledgeable Bank On Yourself Professional, so your plan is structured correctly and so you get proper advice on how to use the plan for maximum growth).

      Are you beginning to see why Wall Street hopes you don’t find out about this?

      No two Bank On Yourself plans are alike, so your results would be different.

      But this is why I call Bank On Yourself the ultimate financial security blanket in both good times and bad.

  3. Pamela,

    Thank you for the quick response. Your answer still leaves me wondering how to answer the ROI question implied by my question. Everyone acknowledges the growth possible from compound interest. But my question is more particularly about the doubling rate. Exponential growth curves will look very different at a compounding rate of 6% than at one of 12%. The first will double about every 12 years, the second about twice as fast. So, for definiteness, one would like to know the expected rate of return for money invested, so as to be able to predict the future size of ones investment.

    So, to rephrase my question: is there anyway to compute or predict the actual rate of return from a B.O.Y. in general, or will the rate depend entirely on the size of the policy?

    Hats off to you for posting David K’s sharply critical comments. Some forum hosts would probably have censored a similar post for its discourteously combative tone, notwithstanding that the author honestly expresses frustrations felt by many.

    [BTW, the -37.7 % drop in the S&P 500 figure I gave in my last comment actually came from the Dalbar research cited in your article.]

    • Hi Jon,

      You are correct; an exponential growth curve will “look very different at a compounding rate of 6% than one at 12%”. And if you really want to see a cool-looking graph, try running it at a 50% rate of return!

      I think you get my point. Almost no one is actually getting a 12% rate of return, unless they’re one of a lucky and very small minority – or they’re investing with someone like Bernie Madoff.

      Remember, even 80% of all mutual funds underperform the overall market, as do 80% of all investment advisors.

      And haven’t we learned yet that return OF your money is at least as important as a hoped for return ON your money?

      But getting back to your questions…

      1. Bank On Yourself policies don’t just benefit from the exponential growth you get from compounded interest. Your dividends are also growing at a compounded rate and all your previous gains are locked in and continually compounding, too. (Try getting that in the stock market.)

      In addition, a Bank On Yourself policy actually does grow more efficiently every year you have it, because the net amount the company has at risk keeps decreasing.

      2. Someone in a 35% tax bracket would have to get a 7-8% return before taxes to equal the net return on a typical Bank On Yourself designed policy (under current tax law, you can take retirement income from the plan with little or no tax consequences). And you get this without the risk and volatility of stocks, real estate and other investments.

      The net return does vary some, depending on age, how much premium you put in, and other factors. The return is typically higher when larger premiums are paid.

      Surprisingly, the return isn’t necessarily better just because you start a policy at age 30 rather than 55.

      The bottom line is that no two plans are alike – all are custom-tailored to the person’s unique situation. And the only way to truly know the bottom-line results YOU could get is to request a free Bank On Yourself Analysis and get a referral to a knowledgeable Bank On Yourself specialist.

  4. My question is this: Where does the growth come from? I mean the insurance company has to invest it somewhere, what are THEY investing in? It they’re investing my cash into the market, what keeps my money from inadvertently being exposed to market risk? If they’re relying on more and more people to buy policies, that’s a Madoff type problem. Are they investing in real estate, corporate bonds, government bonds, or what?

    • The companies used for Bank On Yourself invest primarily in investment-grade fixed income assets, primarily long-term corporate and government bonds. They are very conservative companies not owned by stock holders and thus do not have the short-term demands of Wall Street.

      They are actually stronger today than most insurance groups were before the market drop, with capital reserves more than twice the industry average. Their financial strength also allows them to hold their assets for lengthy periods of time.

    • This isn’t just about investing like these companies have done successfully for more than a century (and I strongly doubt you could come anywhere close to getting the same results).

      It’s about all the additional advantages and guarantees you get from a Bank On Yourself policy. I’ve spelled out 18 of them on the $100,000 Challenge and I encourage you to take it.

      That’s how much I’ll pay to the first person who uses a different financial product or strategy that can match or beat Bank On Yourself.

  5. It’s a bunch of horse-hockey…

    But if you need this “system” to enable/empower the self-discipline it takes to succeed financially – Go for it. It will work…

    Don’t be under the impression that you have found some “magic secret”. To summarize “BOY”:
    1. You have an income
    2. You can and have saved some money
    3. Some firm manages/invests the money you saved
    4. You borrow against that money
    5. You pay it back from your income

    It all starts and ends with your income, with the discipline to save in the middle, pure and simple…

    Oh but, what about the magic hooks that really gets things going?? Like paying yourself a commercial rate of interest on the money you borrowed from yourself and thus magically “get back” the value of all your purchases over time!!!

    One does not need a life insurance policy to do this – e.g., when you finish paying a bank loan on a car, put that same payment into a savings account for the next car – that payment already includes a commercial interest rate! Then pay cash for the next car.

    In any case it is your INCOME from which such payments come…

    And about the life insurance nonsense: Term life is much, much cheaper for the same coverage as whole life/universal/cash value life/etc… Like maybe 1/10 the cost!

    Think about it – how much is it for a 20 year term policy for a 30 year old? Cheap! How much is a 20 year policy for a 68 year old? Not so cheap. Whole life policies face the same reality – somewhere, somehow they make money – they make their money from YOU.

    Life insurance should only be used for what it is intended – paying someone to cover the financial risk of YOUR early death. In fact, it is better to NOT have life insurance later in life when your death has no financial risk. That is a tough one to swallow; most people like to give insurance companies a fine profit late in their lives even as they get ever closer to their death.

    Just do the following, with or without BOY…
    • Live on less than you make
    • Save and invest
    • Shun the use of credit

    If you “believe” in BOY, it will work, but be careful. And remember – there is NO free lunch…

    • Hi Jill,

      Your IP address indicates you work for NASA. But Bank On Yourself isn’t rocket science and you have, unfortunately, missed most of the key points I made both here on my website and in my book.

      It’s easy to put your beliefs to the test if you’re convinced you’re right: Take my $100,000 Challenge. If you’re the first person to show you use a different method that can match or beat Bank On Yourself, there’s a $100,000 reward waiting for you.

      So, I dare you! Take the Challenge now, or keep your head in the sand – you choose!

      -Pamela Yellen

    • One difference you haven’t taken into account is the value of earning interest on cash value. You do not have to pay taxes on the interest you earn. In fact when you retire you can access and use the cash value and the interest on the cash value without tax consequences. You don’t pay income tax until you take all the money you put into the cash value and all the money you paid for insurance. In effect they life insurance is paid with pretax money in whole life and post tax money with a term policy.

  6. F. B. on Your comment is awaiting moderation. November 19th, 2009 12:12 pm

    Pamella you mention in one of your articles that we have “start up” cost but then we no longer have those cost. When would one stop paying these cost? How much does one continue to pay after the start up period? Can you give an example please?

    Thanks and I love what I am learning and seeing.


    • It’s not so much a start-up “cost” as a start-up ‘phase”. None of the premium you pay is a cost, since you can get back every dollar you put in-tax-free, under current tax law.

      The concept I’m trying to explain is that, with a Bank On Yourself-designed policy, you won’t get back every premium dollar in the first couple years, since you’re paying the lion’s share of the costs such as insurance, mortality, underwriting and commissions then.

      But these policies are designed to become more efficient every year you have them – with no luck, skill, or guesswork needed to make that happen.

      There are some examples in my book in Chapters 4-6.

      But no two plans are the same. The best way to find out what your own bottom-line results could be with a program tailored to your unique situation and goals, is to request a free Bank On Yourself Analysis and referral to a Bank On Yourself Professional.

  7. I liked your book so I am at the website reading comments from your critics and endorsers. I was wondering if you could tell me the names of some of the insurance companies you deal with in setting up BOYB plans. I just took out a policy with the Hartford and I am now wondering if I could change it to a BYOB plan.

    • Only a handful of companies have a product that fits all the requirements for the kind of policy recommended to maximize the Bank On Yourself method. The Hartford does not fit the bill – it’s a stock company for starters, and Bank On Yourself uses companies that are, in essence, owned by policy owners, not stockholders.

      I am an educator, not a licensed insurance agent, so I am not allowed to recommend any specific companies. That’s the job of the Bank On Yourself Professional.

      I’d recommend you request a free Bank On Yourself Analysis and get a referral to one of these highly trained experts who can show you the difference in the bottom-line results you could get with a properly-designed Bank On Yourself policy compared with the one you just purchased. Then you’ll be in a position to make an informed decision of how to proceed.

  8. I can follow the logic of this system and I understand how it works. I just wish you didn’t use so many gimmicks trying to sell it. The questions in the $100,000 Challenge are questions that define a BOY system, so if a competing system is not Bank On Yourself, it won’t pass. As a “challenge”, that’s pretty weak. I also attended a seminar from a BOY advisor. The concept is interesting, but to sign up I would have to hold my nose and ignore all of the skewed information and apples-to-oranges performance data he quoted. The system has merit, but I wish the sales approach stuck more to actual facts and fewer gimmicks.

    • The idea of the $100,000 Challenge came to me in one of the deepest, darkest hours of my mission to share the message of Bank On Yourself with the American public.

      There is SO much misinformation about this product and strategy, I needed a way to help people overcome their skepticism and educate themselves about Bank On Yourself.

      There are 18 distinct advantages and guarantees of Bank On Yourself in the Challenge. When people take the Challenge they are surprised to learn about all these benefits.

      And, guess what? They WISH their financial strategies had more of these advantages and guarantees.

      Everything I’ve said about Bank On Yourself is a fact, but if I don’t create some excitement and controversy, the noise, venom and ignorance of Wall Street and most financial representatives and “gurus” will drown it out.

      I’m sick and tired of every “expert” saying there was “no place to hide” during the financial crisis. It’s a lie, as everyone who has a Bank On Yourself policy knows.

  9. Pamela,

    A friend introduced me to a book, “Becoming your own Banker”; Unlock the Infinite Banking Concept by R. Nelson Nash. I believe it is suggesting the same techniques you are… Am I correct ? Is there any difference between the two that you know of and are these just different companies with their own reps. that know the same basic system ?

    Also, if one were to go with a B.O.Y. type plan, is it necessary to build it up over time, rather than just dumping funds in all at once ? i.e. Ending up with $250k funded over many years, as opposed to just putting in the $250k all at once on day one ?

    This plan, of what I know of it, is intriguing since we were heavily invested in Real Estate the old fashioned way. We got wiped out with the recent down fall in the economy since we bought the wrong way over the last ten years and were doing development projects that were started before the “crash”, but were finished after the major decline and the lending had dried up. Being at the mercy of the banks has left a sour taste in our mouth, so anything different is worth investigating.

    Also, with traditional banking, your accounts are reported to the Fed’s. Is having money in your own B.O.Y. designed policies allow for more financial anonymity ?

    Thanks in advance…


  10. I have one question? Say I die what happens to the cash value in the policy does it go back to the company or does my family get it.

  11. Please explain the complete economics. Assume $1000/month into the plan.

    How much does the agent make? I’ve heard 95% of the first year’s payments into the plan. How can it possibly be so hi? Doesn’t this create a massive incentive for people to oversell this type of plan and not explain the potential failure modes? (i.e. someone over-commits and can’t make that size payment any more?)

    How much do you and your organization make off of the Bank on Yourself referrals?

    How much goes to fees and other places and doesn’t show up as the balance in my account?

    If there’s SO much money to be made here by the institutions holding my money then why don’t they offer other similar more sexy plans than a high priced whole life insurance to access more capital for their investments?



    • Apparently you missed a couple key points:

      1. When agents structure a Bank On Yourself-type policy the way I describe, they take a 50-70% cut in commissions. This would be the LAST thing they’d sell if commissions were the main motivation.

      2. Much like buying a couch or a TV, ALL the costs of “sales and manufacturing” (commission, insurance, mortality, etc.) are included in the price, which in this case is the premium.

      When you request a free, no-obligation Analysis, you’ll see the bottom-line results you could get if you added Bank On Yourself to your financial plan. (Try doing that with stocks, mutual funds, your 401(k), etc.)

      3. This DOES give you more access to capital much more quickly (first year, even the first month), as I’ve explained numerous times.

      And it’s so much “sexier” than any other financial product or strategy that the $100,000 cash reward I offered to the first person who uses a different product that can match or beat Bank On Yourself remains unclaimed. I hope you take the challenge. You’ll be shocked to learn the facts.

  12. Is this aka LEAP? It sounds very similar. I was introduced to it by an advisor with Guardian Ins years ago. Is it the same?

    • It’s similar in that it uses dividend-paying whole life insurance as its foundation. But it’s very different in that with Bank On Yourself, riders are added onto the policy to supercharge the growth of your cash value in the policy, whereas LEAP believes the death benefit is more important than the cash value.

  13. If I am loaning from myself at 6% and paying back at 10%, is the 4% difference all that is working for me. What happens to the 6% I am paying back on my money?

    • If your policy was written with one of the companies recommended by Bank On Yourself Professionals, you will end up with the same cash value (and dividends) as if you hadn’t borrowed from the policy.

      If you used money you had in a savings account to buy something, that money is now no longer earning any interest for you. With a Bank On Yourself-type policy it’s growing just the same as if you hadn’t borrowed it – the interest you pay is ultimately coming back to your policy.

  14. This is from one of your answers above:

    1. When agents structure a Bank On Yourself-type policy the way I describe, they take a 50-70% cut in commissions. This would be the LAST thing they’d sell if commissions were the main motivation.

    So what is their main motivation? Why would they work for less? Why is a commission less for a BOY policy then others.

    I’m just curious why someone would work for less commision.

    I’m just a natural born “doubting Thomas” person. I have just started reading your book.

    • I don’t blame you for being skeptical! The fact is that many financial representatives lose interest when they find out about this.

      But the Bank On Yourself Professionals believe in what they do, and have clients that are so happy with their plans that they tell everyone they know about this – without being asked.

      Their clients also become addicted to buying new polices as often as they can, so they can reach more of their goals and dreams, and to have a larger income stream they can predict and count on in retirement.

      Check out the Epilogue on page 221 of my book to hear some of the Professionals discuss why they do this!

  15. Pamela,
    Thank you for your hard work. It can be difficult dealing with the public who has a preconceived notion about yours and Nelson’s strategies. Nevertheless keep sending the message. My question is in regards to LEAP believing that the death benefit is more important than the cash value. And yours being that you place higher emphasis on cash value. I understand both are possible in the later years of the policy but are both possible in the early years? Or must one make a trade off. Thanks.

    • Thanks for your kind words and support!

      The way these policies are typically structured, you do have a trade-off between higher cash value or higher death benefit.

      However, there is actually a way to have super-charged cash value in the early years AND a higher death benefit.

      I’m not a licensed financial representative, so I’m not able to get into detail on policy design, but the Bank On Yourself Professional are trained in how to do this.

  16. I have read your book and website and am frustrated. A rate of return is promised but never specified. What rate of return is “guaranteed?” Why is this parameter kept so closely guarded that it isn’t revealed until one meets with an “advisor?” This makes you look like a snake-oil salesman, by offering anecdotal evidence of vacations to Paris but failing to specify the return on investment.

    • The guaranteed values of a whole life insurance policy will look different for each policy. As I’ve said a number of times, no two policies are alike, and the only way you’re going to be able to see what your guaranteed values will be is to have a Professional do an Analysis for you. That will show you what your bottom line numbers and results will be with a policy custom-tailored to your situation.

      You should keep in mind that the insurance companies recommended by the Bank On Yourself Professionals have paid dividends every single year for over 100 years. So, while dividends are not guaranteed, these companies have a very good track record and in order for you to receive only the guaranteed cash value increase, the company would have to never again pay a dividend for the entire time your policy is in force. Which is why no one has ever received only the guaranteed increase.

      I am sorry that you are frustrated, but you seem to have missed the central point of the book which is that Bank On Yourself is NOT about rate of return.

  17. I read and read and read and I donnot have time for the theatrics just tell me what the product is and how it works. Paula

  18. In your book, people only seem to be talking about paying back 1 loan at a time before taking out another loan. Can you have more than 1 loan out at a time?


    • Yes – you can have multiple policy loans out on one single policy (I’ve borrowed 3 separate times in the last 18 months from one policy I own), however they will all be added together in the company’s accounting as one aggregate loan.

  19. Pamela,
    A couple of questions.
    1. Could you break down what the two portions of the premium pay for? And do they both add cash value?

    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?


  20. I’ve read Tax-Free Retirement and appreciate the differences of BOY. It the retirement income phase of BOY considered consecutive loans or actual withdrawls of cash value? Also, does the premium payment continue through retirement until death?
    Thanks for educating people to other options.

  21. Pamella,

    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!

  22. You need to mention that these types of policies and others are covered by each individual state up to acertain value.

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