A financial strategy that uses Whole life or Indexed Universal life insurance as a source of funds for future needs.
With cash flow banking, you purchase a life insurance policy and then borrow against the cash value of the policy to fund major expenses, such as college tuition, a new car, or a home renovation.
The interest rate on these loans is typically lower than what you would pay for a traditional loan from a bank, and you don't have to repay the principal until you die or surrender the policy.
The "cash flow banking" strategy, also known as the
Infinite Banking Concept (IBC), is a financial strategy that revolves around
utilizing a life insurance policy to create a personal banking system.
While this concept has gained popularity, it's important to note that it also
has its critics. Let's explore some of the potential benefits associated with
the cash flow banking strategy:
Access to capital: By establishing a life insurance policy and
utilizing it as a personal banking system, individuals can potentially access
cash value within the policy through policy loans or withdrawals. This can
provide a source of capital for various purposes, such as investments, business
opportunities, or major expenses, without the need for traditional loans from
banks or financial institutions.
Tax advantages: Whole and Indexed life insurance policies offer certain tax advantages.
The growth of cash value within the policy is generally tax-deferred, meaning
you don't have to pay taxes on the growth as long as it remains within the
policy. Additionally, policy loans are generally tax-free, providing a way to
access funds without triggering taxable events.
Asset protection: In many jurisdictions, life insurance policies have certain
creditor protection benefits. This means that the cash value within the policy
may be shielded from creditors in the event of bankruptcy or legal judgments.
However, it's important to consult with a legal professional to understand the
specific protections available in your jurisdiction.
Legacy planning: Life insurance policies typically include a death
benefit, which can provide financial protection for your beneficiaries upon your
passing. This can be beneficial for estate planning and ensuring your loved ones
are taken care of.
Control and flexibility: With cash flow banking, individuals have greater
control and flexibility over their financial decisions. They can access the cash
value within the policy, repay loans on their own terms, and potentially earn
dividends or interest on the policy's cash value.
It's important to note that while these benefits are often cited by proponents
of the cash flow banking strategy, there are also potential drawbacks and risks
associated with it. Policy fees and premiums can be high, and the returns on the
cash value are generally lower compared to other investment options. It's
crucial to thoroughly research and understand the specifics of any insurance
policy and consult with financial professionals before implementing this
strategy.
LIFE INSURANCE DOESN'T HAVE TO
BE AN EXPENSE where you never see your money until you die...use it as a
financial wealth building strategy!
Ultimately, whether or not cash flow banking is
right for you depends on your individual circumstances and financial goals.
If you're considering using cash flow banking, it's important to speak with
a financial advisor to get personalized advice.
To learn more about cash flow banking, contact Chet Kowalski, Independent Insurance Agent in Arkansas.
Contact information:
Phone: 816-866-7596
