A properly structured Infinite Banking whole life policy is designed to maximize cash value growth while maintaining the tax advantages and long-term benefits associated with whole life insurance. The goal is to optimize the policy for cash flow management, investments, and wealth accumulation.
Here are some key elements of a well-structured Infinite Banking whole life policy:
Dividend-paying whole life policy: Choose a policy from a reputable, financially strong mutual life insurance company. Mutual companies are owned by policyholders, and as such, they may distribute policyholder dividends, which can enhance cash value growth and policy performance.
High early cash value: Opt for a policy designed to maximize cash value growth in the early years. This typically involves structuring the policy with a base whole life policy and a Paid-Up Additions (PUA) rider. The PUA rider allows you to contribute additional premium payments that go directly towards increasing the cash value and death benefit.
Non-MEC policy: Ensure that the policy is structured as a non-Modified Endowment Contract (non-MEC) to maintain the tax advantages of a whole life policy, such as tax-free loans, tax-deferred growth, and a tax-free death benefit. Work with an insurance agent to design the policy so that it does not cross the MEC threshold.
Flexible funding options: A well-structured Infinite Banking policy should offer flexible premium payment options, allowing you to fund the policy according to your financial goals and circumstances. This can include single premium, limited pay, or level premium options, as well as the ability to adjust premium payments over time.
Guaranteed cash value growth: A properly structured policy should have a guaranteed cash value growth rate, ensuring that your cash value accumulates regardless of market conditions.
Policy loans: Ensure the policy offers favorable loan provisions, allowing you to access the cash value through policy loans for personal or business purposes. Look for features like competitive loan interest rates, no restrictions on loan use, and direct or non-direct recognition treatment of policy loans.
Competitive death benefit: While the primary focus of an Infinite Banking policy is on cash value growth, the policy should still provide a competitive death benefit to protect your loved ones and provide a legacy. Work with your Infinite Banking Practitioner to determine the appropriate amount of coverage based on your financial needs, goals, and risk tolerance.