Infinite Banking Concept
The tool that is used to implement Nelson’s Infinite Banking Concept, is a properly designed dividend paying participating whole life insurance policy, or a system of policies. The money returned to a policyholder by the life insurance company if the individual forfeits the life insurance contract before it matures, or before an insured event happens, better known as total cash surrender value, acts as collateral for policy loans from the insurance company. The Policyowner has full contractual authority and so when a policy loan is requested, it is issued unstructured, meaning the policyowner controls the repayment schedule. The insurance company places a lien on the death benefit for the loan balance and the entire cash value of the policy continues growing daily … uninterrupted. The reason the life insurance company does not require (nor can they ask for) a repayment schedule, is the insurance company itself guarantees the collateral (the total cash value). Policy loans are the best invested asset the life insurance company can have because they establish a guaranteed return and the is no risk of default.
The life insurance policy is designed to cover the whole life of an individual, and not just to help their beneficiaries when the individual dies. That said, the policy is participating, meaning the policy owner becomes a part owner of the life insurance company, and participates in the divisible profit generated in the form of dividends. Now I know what you’re thinking when you read the word dividend. “Here comes Revenue Canada”. That is not the case. When dividends are chunked back into the policy to purchase paid up additions for no additional cost, there is no taxable event. And each paid up addition also receives dividends every single year they’re declared. Now you may have heard that “dividends are not guaranteed”. That’s not true. The only dividend that is not guaranteed is the one that hasn’t been declared yet. Life Insurance Companies who sell participating whole life policies declare dividends one time annually, and when a dividend is declared, it is contractually guaranteed to be paid and it cannot ever be repossessed or lose value.