We’re so thankful for the opportunity to answer your money questions and clear up your confusion. If you’re stuck, we want to help you make sense of the situation so you can move forward. 

https://www.youtube.com/watch?v=zeWqkGwSBq4

Today, we’re continuing the conversation to answer questions from you—our audience. We want to help you on your quest to control your financial future.

There are some great ones here that might be on your mind too. So maybe you’ll get the answer you’ve been needing, and get one step closer to your goals… OR maybe it will prompt you to ask a question of your own… tune in now!

Table of contentsWhy is Whole Life Insurance “Better” Than Indexed Universal Life Insurance?Can You Explain “Other People’s Money”?Can You Explain the Difference Between Dividends and Interest?Is it Wise to Run Expenses Through an Infinite Banking Policy?Book A Strategy Call

Why is Whole Life Insurance “Better” Than Indexed Universal Life Insurance?

The answer boils down to the contractual guarantees of whole life insurance versus IULs. 

An IUL contract is roughly twice the size of a whole life insurance contract. The reason it is so lengthy is that the insurance company has to include explanations of all the risks involved. An IUL carries much more risk because of its correlation to the stock market. And because it’s risky, taking policy loans from an IUL shifts even more risk off of the company's plate and onto yours. 

Agents often sell IULs as the best of the stock market’s upside, and you can’t lose money. However, that isn’t actually true. To begin with, you don’t get the best of the market, because IULs often have a maximum rate, or a participation rate, or some other provision that limits how well you can do. And while you cannot lose money from a downturn in the stock market, your policy cash value can decrease. Unfortunately, people don’t understand that if the policy doesn’t perform as well as the “hypothetical examples” given by the insurance company, the companies can increase the cost of insurance, which reduces your account balance.

Whole life insurance guarantees that the money credited to your cash value will not decrease. So although dividends are not guaranteed in whole life insurance, they have a great track record. That, and the only way your policy will decrease is through withdrawals. In fact, your whole life contract guarantees that your cash values floor will increase every year.

The bottom line is that we do not endorse using an IUL as an infinite banking policy. You can learn more about this in Privatized Banking: What Kind of Policy Do You Use?

Can You Explain “Other People’s Money”?

One viewer asked: 

Can you explain OPM further? In real estate, when you use OPM as a loan, your cash in the bank is readily accessible. For example, let's say I have $100k in the bank & I borrow $100k to buy a property instead of paying cash. I've borrowed $100k and still have access to $100k to buy another identical property for cash (access to $200k total). But with a policy loan, if my cash value is $100k, let's say the insurance company collateralizes my $100k cash value and they lend me $100k, I can not go back to my policy and cash out my $100k cash value since it's collateralized. This means I only have access to $100k, not $200k, like in the first scenario. Am I mistaken?

We love that this question is so thoughtful and detailed. To answer the first part of your question, we agree! If you have $100k in the bank as cash, and you get an unsecured loan of $100k, you are leveraging OPM (other people’s money) to have greater access to capital. If you’re using infinite banking, and you have $100k of cash value and you collateralize it, you are tying it up so that you can no longer use it. However, you’re getting access to $100k of the insurance company’s money and leaving your cash value to sit and continue accumulation. Essentially, you’re trading your access,