![]() ![]() If you can’t secure a whole life policy or afford to fund it to a relevant degree, it may not even be an option for you. Infinite banking is not a one-size fits all solution. ![]() “Banking is a necessity,” Cordier says, “but banks are not.” …and the cons Some IB converts also consider the strategy a philosophical victory over Canada’s banks, who basically follow the same method, only by using your money instead of their own. The capital you build inside a life insurance contract is tax-exempt borrowing against it won’t cause you to owe taxes and in most instances, the final payout on the life insurance policy is tax free as well. But you can go to another lender too, as the money in your policy makes for good collateral on a loan. The approval times are short and, because the policy is guaranteed, the credit requirements are basically nil. ![]() Getting a loan from an insurance provider can be much faster and smoother than securing one from another lender. Scott Cordier, certified financial planner at Opendoor Financial and founding member of Infinite Banking Canada Group, says the interest rates insurers offer to borrow against a policy range from 4.45 per cent to 6.2 per cent. Instead of removing that cash from your bank account or liquidating other investments to access it, the money you’ve saved in your policy keeps growing. But if instead you borrow the money from your insurance policy, the amount borrowed stays where it is - in your policy. If you spend the cash in your savings account, that money is gone forever. Need $50,000 for your kid’s education or $10,000 for a long overdue holiday? Borrowing the funds from your insurance provider can help you pay for the things you need without having to add to your line of credit or credit card or take out a high-interest personal loan.īut whether you need a loan or not, IB’s boosters say anyone can benefit from this method. Infinite banking can be an intriguing method of accessing cash. Infinite banking is a fairly simple concept, but funding your policy properly and using it to its ultimate use is something you’ll need to discuss with a financial advisor and your insurance provider. So if you want to put more in, you’ve got to buy more insurance,” says Chris Karram, co-founder of Safebridge Financial Group. “The amount of money you contribute is tied directly to the amount of insurance you own. There is a maximum additional amount that you’ll be allowed to funnel into your policy if you want to go beyond that limit, it will cost you. The more you save, the more you can borrow. To get the full benefit of infinite banking, you’ll need to fund your policy beyond the minimum premiums you’re required to pay. This advertisement has not loaded yet, but your article continues below. In both cases, you still possess the appreciating asset being borrowed against - your policy or your home - and you have the freedom to pay back the loan at your leisure, ideally at an interest rate lower than what other lenders may offer. In that way, IB is a lot like a reverse mortgage. If you don’t pay back the loan to your insurance company, it can always take the amount owing out of your death benefit. Money can be taken out of the policy, which, because it’s guaranteed by your provider, makes for excellent collateral. When a whole life policy is activated, its value can be borrowed against. Money can be stored in the policy, which receives regular boosts in the form of dividends. In addition to providing benefits in the event of a person’s death, whole life insurance policies also have a savings component. IB starts with the purchase of a whole life insurance policy. Let’s take a closer look at infinite banking and see if it might work for you. But those who have sipped rather than chugged the IB Kool-Aid say it’s a strategy that may be too complex to be marketed on a mass scale. Infinite banking has amassed a dedicated following over the years, with proponents saying it’s a method all consumers can use to make better use of their savings. Activate your Online Access Now Article content If you are a Home delivery print subscriber, unlimited online access is included in your subscription.
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