Discover How Policy Loans Work.
Taking advantage of everything whole life offers.
There is no other financial vehicle that comes even close to giving you all the advantages of a whole life insurance policy loan, which is why some people say it may well be the 8th wonder of the world. It’s also misunderstood by many people – including many financial advisors.
So we’ve put together the answers to the 10 most frequently asked questions about whole life insurance policy loans and explained the benefits of this feature in easy-to-understand terms. If you’re already a IBC policy holder, you can read this information and use it as a helpful Consumer Guide to Policy Loans:
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10 Most FAQ's
1. What is a whole life insurance policy loan?
One of the great “living benefits” of a whole life insurance policy
is that you build up cash value which you can access as needed
for emergencies, to make major purchases like cars and vacations,
for a college education, business expenses and/or to fund your
retirement.
You are actually borrowing against your cash value and
death benefit of your whole life insurance policy as collateral for the
loans.
If you don’t pay your loans back, they will be deducted from the death benefit (along with any interest due) before the company pays out the claim.
2. How much and when can you borrow from your policy? You have the option of borrowing up to 85-90% of your cash value through one or more policy loans at any time... and for any reason. The only questions you’ll be asked are how much do you want and where do you want it sent? You are contractually guaranteed to be first in line to get access to your cash value and you can’t be turned down for a loan! You don’t need to fill out any nosey credit apps or pledge your first born.
Unlike the Whole Life Insurance Policies Suze Orman, Dave Ramsey and most advisors talk about that generally have no cash value in the first year or two, a properly-designed IBC- type policy will have cash value in the first month. Our general recommendation is not to plan on taking a policy loan in the first year, though that option is available to you.
The opportunities that Policy Loans provide are endless. In fact, we can show you how to completely wipe out 3rd party debt in a third of the time simply by having a purpose behind those dollars.
Check out the IBC reviews where policy-owners of all ages, incomes and backgrounds discuss how they’ve used their policy loans.
Of course many people use them to finance things like cars, vacations, college educations and business expenses. But they’ve also used them in some very creative ways and to take advantage of the opportunities that invariably come up, such as:
To cover living expenses after losing a job.
To pay an unexpected expense on very short notice.
Ray Croc used it to buy out his partners out and launch the Ronald McDonald Campaign.
A Business Owner used it to purchase new equipment and make payroll during the off season.
The Real Estate investor used it to fund a project.
To help raise $100,000 for their church.
What Dreams Could our Banking Policies Help You Finance?
If you don’t already use The Infinite Banking Concept, what are you waiting for? It’s easy to find out how IBC can make your long-term and short-term goals and dreams come true when you Request A Strategy Session with one of our Authorized Wealth Strategist.
If you don’t already use "The Infinite Banking Concept" what are you waiting for?
It’s easy to find out how IBC can make your long-term and short-term goals and dreams come true when you Request a Strategy Session with one of our Authorized Wealth Strategist .
3. Do you pay interest on policy loans and who benefits from that interest? You do pay interest on your policy loans – typically at below-market, competitive rates. If you don’t pay the loan interest, which is due the end of each policy year, the company will automatically add the interest to your loan balance.
It’s a good idea to at least pay the annual interest due on your policy loan out of your pocket each year to keep your loan from increasing (unless you are taking retirement income). And be aware that excess unpaid policy loans may cause a policy to lapse with potential tax consequences.
4. Do you have to pay your policy loans back and what are the repayment terms? There is no requirement to pay back your policy loans. But think of it this way: If you borrow money from a bank and don’t pay it back, you’re stealing from the bank. If you borrow from your life insurance policy – which is like borrowing from yourself – and you don’t pay it back, you’re stealing from yourself!
One comment we often hear from IBC policy-owners is about how much they now ENJOY paying back their loans, since they can see how it builds their plan back up, rather than lining the pockets of banks and finance companies!
But the reality is that “stuff happens.
And when it does, you can reduce or skip some payments and not have to worry about collection calls, black marks on your credit report and so on. Knowing you have that flexibility brings great peace of mind, as many people who use the IBC method have noted. We recommend you set up a loan repayment plan at the same time you take a policy loan – with the payments automatically coming out of your checking account each month. Your Wealth Strategist can help you create a repayment schedule that meets your needs and set up the automatic loan repayments.
Note: Excess unpaid policy loans can cause a policy to lapse with potential tax consequences. So work closely with your Wealth Strategist to make sure you avoid this happening.
5. How is it possible for your policy to continue growing even on the money you’ve borrowed from it? When you borrow from your policy, the money doesn’t actually come directly from your policy. It comes from the company’s general fund, because all the cash value of all the policies is pooled together.