Infinite banking is a process that involves individuals being their own bankers. The idea of ‘’Infinite Banking’’ was conceived by Nelson Nash, the author of the book titled ‘’Becoming Your Own Banker’’. In this bestselling book, R. Nelson Nash discusses the impact of financing with third party banks and lenders over a lifetime and how much wealth is transferred by the average Canandian. He further goes to explain that “you finance everything you buy…you either pay interest to someone else or give up interest you could have otherwise earned” . The real power of The Infinite Banking Concept is that it solves for this problem and empowers the Canadians who embrace this concept to take control back over their financing needs. It is often misunderstood but this includes the cash purchases that many make over a lifetime as they are still financing by giving up the lost opportunity of earning on your own savings over multiple generations. To solve this problem Nelson —-reliance on life insurance policies that provide dividend s and how holding those policies can give one an opportunity to manage their own finances by borrowing from/against income rather than relying on traditional financial institutions for loan products. It has been called many things over the years including Infinity Banking, Cashflow Banking, The Perpetual Wealth Code, The money multiplier and many other variations.
Infinite Banking Concept Creator Nelson Nash
In Nelson’s Infinite Banking Concept, the money paid to a policyholder by an insurance company if the individual terminates the contract before it matures or before an insured event happens, better known as cash surrender value, acts as security for a loan. Qualified policyholders should call their insurer and request for a policy loan.
The life insurance policy is designed to cover the entire life of an individual, and not just to help their beneficiaries when the individual dies. That said, the policy is entitled to give out dividends, which means it creates a form of revenue that adds to the cash value of a policy within a certain period of time.
Once the policy is activated, it acquires value and the policyholder can borrow against it and use the policy as collateral in the event of a financial emergencies or unforeseen expenses during his lifetime.
The main advantage of the infinite banking process is the increase in cash flow or liquidity. The net worth of a life insurance policy standing in as security is has more liquidity, than, let’s say, equity in real estate, since the loan can be accessed faster and the policyholder can get cash more quickly and at reduced interest rates as compared to the ones obtained from conventional lenders.
The development of a person’s cash flow can be remarkable, particularly in the onset of financial difficulties or unexpected expenses like hospital bills or when you need to finance the purchase of a car. If a policyholder is rendered temporarily jobless, either because they are sick, bereaved, or permanently jobless, the insurance policy loan might also be useful in such a situation. This is because policies under whole life insurance fall in the category of non-correlated – simply meaning that they are not tethered to the fluctuations, as they always maintain their value.
Infinite Banking has disadvantages too. A person must be eligible for a whole life insurance policy. And even if an individual is eligible, paying for the insurance policy is sometimes difficult because of the financial burden that accompanies it.
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