Are you considering whole life insurance and want to know which is better: Direct vs. non-direct recognition life insurance companies? What does it mean? Why does it matter? How does it impact you? And should it be a part of your decision-making process?

https://www.youtube.com/watch?v=y1UZ_EYIns0

In this episode, we discuss the why, how, and what of direct recognition vs. non-direct recognition, so you have the knowledge you need to decide.

So if you want to know how a life insurance company’s treatment of dividends when you have a policy loan affects your policy’s cash value growth over time and your future ability to borrow against your policy for Infinite Banking, find out whether it matters, and most importantly, tune out the biased opinions of some who say you should ALWAYS have it one way, and NEVER the other, and really understand it, so you can get the best dividend-paying whole life policy, tune in below!

Table of contentsWhere Whole Life Insurance Policies Fit Into the Bigger PictureWhat Does Direct or Non-Direct Recognition Mean?Direct vs. Non-Direct Recognition CompaniesHow Policy Loans Affect DividendsFixed vs. Variable Loan RatesShould You Choose Direct or Non-Direct Recognition?Choosing the Best Life Insurance CompanyReady to Start Your Life Insurance?

Where Whole Life Insurance Policies Fit Into the Bigger Picture

Privatized Banking with whole life insurance is just one part of the bigger journey.

That’s why we’ve developed the 3-step Cash Flow System. It’s your roadmap to go from just surviving, to a life of significance, purpose, and financial freedom. 

The first stage is the foundation.  You first keep more of the money you make by fixing money leaks, becoming more efficient and profitable. 

Then, you protect your money with insurance and legal protection and Privatized Banking. 

Finally, you put your money to work, increasing your income with cash-flowing assets.

What Does Direct or Non-Direct Recognition Mean?

When you’re shopping for a life insurance policy, you’re likely going to hear an insurance agent use the terms direct and non-direct recognition thrown around often. The terms have roots in the relationship between dividends and policy loans. Whole life insurance dividends are the non-guaranteed part of the life insurance contract, though historically companies have an excellent track record of paying dividends. Each year, companies will declare their dividend rates. 

However, companies handle dividends differently depending on whether you have an outstanding policy loan. Direct recognition companies directly acknowledge outstanding policy loans and will pay dividends accordingly. This often means that they have a different, unpublished rate for any money that is being borrowed against. 

On the other hand, non-direct recognition companies pay dividends at the same rate, regardless of any policy loans. The trade-off is that Non-Direct Recognition companies only have one dividend rate, which often seems lower than direct recognition dividends. 

However, companies all declare dividends differently, so it’s not an apples-to-apples comparison. It’s tempting to see a higher dividend and jump on it, however, these rates are projections. Factors such as the age of your policy and your paid-up additions can affect whether you get more or less than the projection. Whether or not you will use your policy as a family bank will also change which option you go with.

Direct vs. Non-Direct Recognition Companies

With non-direct recognition vs. direct recognition insurance companies, there are strong opinions on either side of the argument. We truly believe that there is a middle ground, and caution you against anyone who explicitly states that one or the other is ALWAYS or NEVER better. This simply isn’t the case.

If one of these things was truly better by a significant margin, they would not both exist today. And yet both models are going strong.