You might wonder how your whole life insurance policy can make you your own banker in Canada. It sounds too good to be true, right? Well, it’s not a magic trick but a smart strategy called Infinite banking, pioneered by Nelson Nash. The strategy can help you save money, grow wealth, and have more control over your finances.

You might have imagined that becoming your own banker meant opening a local branch in your community. But that’s not what the infinite banking strategy in Canada is about. It’s about using a special kind of whole life insurance policy to create your own private and profitable banking system.

You may have heard of some books that talk about using a life insurance policy as a secret weapon to boost your wealth while becoming your own banker. How does that work, you ask? Well, it’s not magic, but a clever way to leverage a special type of policy that lets you borrow money and still earn interest on your savings.

You may be curious about the validity and feasibility of the “be your own banker” concept in Canada. Is it a legitimate and beneficial strategy or a scam and a rip-off?

Using a well-designed life insurance policy as your own banker and borrowing against it can create more money for you than saving and paying cash for everything. This is because of a powerful math principle called compounding that makes your money grow faster.

Wait…

Here are some examples of what you can spend your whole life loans on when you become your own banker:

• Education Costs
• Business Inventory
• Vehicles
• Business Equipment
• Real estate (personal or investment)
• Big home expenses

The 5 Simple Steps to Become Your Own Banker in Canada with Whole Life Insurance

 

 

Step 1: Purchase a Whole Life Insurance Policy to Become Your Own Banker

The first step to implementing the infinite Banking Concept in Canada is to get a whole life insurance policy on yourself or someone you have a close relationship with. You need to pass a medical exam to qualify for the policy. Be careful not to buy a policy on a stranger because that is illegal and frowned upon by the IRS and the insurance companies.

Some examples of people you can buy a policy on are:

• Your child
• Your business partner
• Your spouse
• Your key employee
• Someone who owes you a lot of money

You need to have proper documentation to prove your relationship with the person you want to insure.

After you decide who to insure, what’s next?

Step 2: Choose and Customize a Whole Life Policy for Your Own Banking System

If you want to use a whole-life policy as your own banking system, you need to be careful about the type and design of the policy you buy. Not all whole-life policies are suitable for this purpose. Here are some tips to help you select and optimize a whole-life policy for your own banking system:

• Buy a participating whole-life policy from a mutual insurance company. This means that the policy will earn dividends from the company’s profits, which are shared among the policyholders. A mutual insurance company is owned by its policyholders, meaning it operates in the policyholders’ best interest rather than an outside investor’s.. You can find a list of mutual insurance companies here.
• Add two key riders to your whole life policy: a paid-up additions (PUA) rider and a term insurance rider. A PUA rider allows you to buy extra death benefits and cash value with one-time payments. A term insurance rider provides additional temporary coverage at a lower cost. These riders will boost your cash value growth and access and lower your overall expenses.
• Pay as much premium as you can afford and as the IRS allows. The more premium you pay, the more cash value you will accumulate in your policy. The cash value is your own banking system, where you can borrow money anytime for any purpose. The IRS sets a limit on how much premium you can pay before your policy becomes a modified endowment contract (MEC), which has tax disadvantages. You can learn more about MECs here.

By following these steps, you can create a powerful and flexible banking system with a whole-life policy that works for you.

Step 3: Fund Your Policy Properly to Maximize Your Infinite Banking Potential

You might think paying more for insurance than you need is a bad idea. But you will be surprised to learn that paying an extra premium can actually save you money in the long run. You can avoid the high insurance costs and get more benefits by paying more than the basic amount for your Whole Life policy. You should spend as much as the IRS allows you to pay without making your policy a taxable investment.

Here are some steps to follow if you want to borrow money from your whole life policy and use it as your own bank:

These are the 4 benefits of paying the highest amount of premium for your Whole Life insurance policy to create your own bank:

1. You reduce the commission fees for the agent who sold you the policy, as they only get a small percentage of the extra premium you pay.
2. You increase your cash value immediately, as most of the extra premium (90-95%) goes directly to your policy’s savings component, which you can access anytime.
3. You buy more permanent coverage with one payment, as the rest of the extra premium (5%-10%) purchases an additional slice of death benefit that is fully paid-up. This is called a Paid-Up Addition (PUA), which boosts your guaranteed cash value and your share of the dividends from the mutual insurance company.
4. You accelerate the growth of your cash value as the PUAs add to your policy’s savings component, which earns a fixed rate of return every year, even if the company pays no dividends.

Step 4 – Use Your Policy’s Cash Value for Your Needs and Investments

One of the advantages of having a cash-value life insurance policy is that you can use the cash value for your own purposes. You don’t have to just let it sit in your policy and grow. You can become your own banker and use the money to buy things, invest in other opportunities, and create wealth for yourself and your family.

There are two ways to access your cash value: withdrawal or loan. Both have pros and cons, so you should consult your insurance agent before deciding.

1. Withdrawal: You can take out some of the cash value from your policy without paying taxes as long as you don’t withdraw more than what you paid in premiums. However, withdrawals will reduce your death benefit and may affect your policy’s performance.
2. Loan: You can borrow money from your policy’s cash value without paying taxes or affecting your death benefit. You will have to pay interest on the loan, but the interest will go back into your policy, increasing your cash value and dividends. You can repay the loan at your own pace or not at all, but the loan balance will be deducted from your death benefit when you die.

You can use the money from your cash value for anything you want, such as:

• Buying a car, a house, or other big-ticket items
• Paying for college tuition, medical bills, or other expenses
• Investing in stocks, real estate, or a business
• Saving for retirement or creating a legacy

The benefit of using your cash value as your own banker is that you can leverage the power of compounding. Your cash value will continue to grow inside your policy, even when you borrow from it. This means you can earn interest on both your cash value and your loan simultaneously. This way, you can create more wealth than saving money in a bank account or paying cash for everything.

Step 5: Repay Your Policy Loan

When you borrow from your life insurance policy, you have the option to repay the loan on your own terms. You can use your personal banking system to repay the loan and keep your policy’s growth and protection intact. Here are some tips to help you repay your policy loan with your personal banking system:

• Check your loan balance and interest rate: You can find out how much you owe and what interest rate you pay on your policy loan by looking at your annual statement or contacting your insurance company. The interest rate is usually lower than other types of loans, but it can vary depending on your policy type and company.
• Decide how much and how often you want to repay: You can choose to repay the loan in full or in part and how frequently you want to make payments. You can pay monthly, quarterly, annually, or whenever you have extra cash. There is no fixed repayment schedule or penalty for late payments. However, you should try to pay at least the interest every year to prevent the loan balance from growing too large.
• Apply your payments to your policy loan: You can make payments by sending a check or money order to your insurance company, indicating that you want the payment to go toward your policy loan. You can also use the dividends from your policy to reduce your loan balance. Some companies may allow you to set up automatic payments from your bank account or credit card.
• Monitor your policy performance and loan status: You should review your policy statement regularly to see how your loan balance and payments affect your cash value and death benefit. You should also check if your interest rate has changed or if there are any fees or charges associated with your loan. You can contact your insurance agent or company for assistance if you have any questions or concerns.

Conclusion

 

In conclusion, the concept of becoming your own banker in Canada by deploying a whole life insurance policy is not only a valid and desirable financial approach but also a powerful weapon for obtaining financial independence and stability. You can set up your own private and profitable banking system by following the five simple steps indicated in this article, allowing you to take control of your finances and unleash a world of possibilities.