Description:

A very common question we get is how multiple whole life insurance policies come into play for Infinite Banking.

In chapter 6 of Becoming Your Own Banker, Nelson Nash states "...I am not describing one life insurance policy. This is to be a system of policies."

In chapter 12 he states "We need a system of many policies to do the job [of accomplishing our banking needs]."

So, what's this all about? How do we go about buying multiple whole life insurance policies and how is this even possible?

Tune in to this important episode where we discuss the ins and outs of owning multiple whole life insurance policies for Infinite Banking.

Episode Outline:

(0:00) - Episode introduction

(1:57) - The idea of having multiple policies

(4:20) - One consequence to putting too much premium into a whole life policy

(7:13) - The business owner mindset for IBC, “expanding your system”

(11:19) - Buying a convertible term policy

(15:40) - Short term vs. long term planning for IBC

(18:41) - Having a better handle on your expenses, income and where it’s all going

(21:41) - To sum it all up: Capital needs a home

(23:06) - Episode wrap-up

About Your Hosts:

Hosts John Perrings and John Montoya are dedicated to spreading the word about Infinite Banking so you can discover for yourself how you and your loved ones can benefit with a virtual streamlined process that will take you from IBC novice to sharing the strategy with friends and family... even the skeptics!

John Montoya is the founder of JLM Wealth Strategies, began his career in financial services in 1998 and is both an Authorized IBC® and Bank on Yourself® professional licensed nationwide.

John Perrings started StackedLife Financial Strategies after a 20-year career in the startup world of Silicon Valley where he specialized in data center real estate, finance, and construction. John is an Authorized Infinite Banking® professional and works nationwide.

And John, let's get this going.

(upbeat music)

Hello everyone, this is John Montoya.

- And this is John Perrings.

- We are Infinite Banking authorized practitioners

and hosts of the Fifth Edition.

How and Why Multiple Policies?

All right, well thank you for everyone for joining us

for this next episode of the Fifth Edition podcast.

We wanted to discuss this topic,

how and why multiple policies,

because it tends to come up, especially early on,

for people who are just learning about IBC.

They have, it's become a frequently asked question,

you know, why do people talk about having multiple policies?

Why not just one really large policy?

So we're gonna discuss that today.

And John, let's get this going.

What do you think about that question?

Why do people ask how and why multiple policies?

- Well, I think like a lot of things

if people have kind of come through this process correctly

they've read the book "Becoming Your Own Banker,"

which of course as always is the source material

for all of this regardless of what you see on YouTube,

that's really where everything comes from.

So a lot of times they read the book and they see

and read about how Nelson Nash had multiple policies

and they read about, you know, starting your next policy.

And so I think it just becomes one of the things

that unlocks sort of the future potential of IBC

where they're like, man,

that I never thought of it that way

because when they start thinking of life insurance

as a financial asset and they realize,

oh, you can have more than one of these

'cause you know, if you look

at normal life insurance acquisition,

someone will have maybe one policy, maybe,

and it'll be like a term policy or something

and they're like, okay, I've got my insurance policy.

And the idea of being able to have multiple policies

is I think pretty new.

You know, and I'll even say groundbreaking

in terms of like how people think.

So I think that becomes one of the things

at the forefront of their mind

where they just think of that they go into the future

and they're like, man, how big could this get for me?

- And also, I think the reason why they ask this question

is because they're trying to compare it

to what they already know.

And maybe they're contributing to a 401k.

Well, you can only contribute

to one 401K at a time, or if you have an IRA,

you can have multiple IRAs,

but you're stuck with that annual cap

on what the government says you can contribute

to all of your IRAs.

You can't just magically put in the annual maximum

into all of your IRAs.

Or maybe they're thinking of it like,

well, I have a checking account

or a savings account at the bank

and you know, why do I need to have five savings accounts

or 10 savings accounts

because I can just keep putting money,

as much as I want into those accounts.

So their frame of reference is skewed to what they know.

And life insurance, let's face it,

when it comes to life insurance,

people, even the financial educators out there,

the so-called educators,

they really don't understand

how these policies are engineered

and what is restraining the use of just putting in

as much money as you want.

So let's hit on that.

- Well, I think, you know, you made a note

in our prep material here

about running a profitable business

and we should all be in at least two businesses.

The first one is the business we're in

and the second one is the business of banking.

We've said it on here a million times.

So the idea is we need to be able

to expand our system of businesses.

And so that gets into chapter 13

of "Becoming Your Own Banker."

He talks about expanding the system.

And so we have to have a way to do that as we go through.

And if we're doing our thing

that by default it's gonna get bigger

and we're going to need to expand the system.

- But let me stop you right there.

What is the one thing that will limit us

from putting as much premium as we want to?

I mean, we could, but what's the consequence

of putting too much premium into a whole life policy?

- I think I see where you're leading me now, John Montoya.

So yeah, I think you're getting towards to the IRS limits

that are placed on a life insurance policy.

- Correct.

- And that's really where any conversation

about policy design and all that stuff,

it all boils down to the limits that the IRS places

on a life insurance policy

called the modified endowment contract limits or MEC limits.

And that's really what limits

the initial funding of a life insurance policy

when it's designed for cash value.

- Simply put, there's an annual maximum of premium

that you can put into the policy

before you pass that modified endowment contract level

and lose the tax favorability of it.

So there's an annual limit

and then there's also a lifetime limit

as far as how much premium you can put into the policy.

So that's the main reason

why you'll hear people

talk about having multiple policies.

It's because especially when it comes to Infinite Banking,

they've reached a point

where they are putting the maximum amount of premium

that they possibly can into their policy

and now they have room left over.

And that excess money is basically going back

to a traditional bank to do nothing

in those checking and savings accounts.

And so that's the reason why we expand the portfolio.

We will add additional policies

because we want that money not to be in a traditional bank

but we want it to be warehoused in the best place possible.

And that is an additional IBC policy.

- Yeah, and I'll just tack on you

you mentioned money overflowing, so to speak,

because you've reached the maximum limit

of a specific life insurance policy

and going back to the bank,

well, I would say more often than not,

it's actually getting spent, you know,

it might go back to the bank for a hot second

and then it'll become part of their lifestyle expense.

And so then now all of a sudden

that has left your system forever.

And so to kind of recap that, we have two limits.

We have the IRS limit, which limits cash value

to death benefit, and then we have a full underwriting limit

that the insurance company

will only underwrite you for so much.

And so there's a limit to how much you can pay in premium

in any given individual life insurance policy.

There's some caveats to that where you can have some,

there's some provisions out there

that you can buy the right

to buy more life insurance in the future.

But just keeping things simple,

that's what's going on.

- And getting back to what you were saying

about running a profitable business

and being in two businesses,

one of my favorite things that Nelson would talk about,

just the mindset there,

if you have the discipline to save money

and your cash flow increases, well,

you should be thinking like a business owner.

We talk a lot about having a business owner mindset.

Well, this is exactly what we're talking about here.

If you are now capped as far

as what you can put into your IBC whole life policy

and you've got that excess cash flow,

if you're thinking like a business owner,

what do you do with that excess profit?

You reinvest in yourself, right?

Well, if you pretend you're running

let's say something familiar like a Starbucks, right?

You own a franchise, well, it's very profitable.

What do you do?

And this is what Starbucks has done so successfully,

they open up a new location, maybe across town,

they keep doing it over and over and over again.

And that's what you do

if you're a successful business owner,

you keep expanding your business.

So that's the mindset that we want all of you listeners

to have when it comes to IBC.

And we want you to get into this growth mindset

where you are looking to contribute

as much as you possibly can into your policies

and then keep expanding from there.

Because like we say so often,

you'll never be in a worse place by having access to cash.

And this is the ultimate place to warehouse cash.

- Man, I love that analogy.

I never thought of it that way

of just opening up, you know, additional franchise locations

or different locations of your business.

That's so good because if we talk about being

in the business of banking, well yeah,

why wouldn't we have multiple locations for our business?

And so we're just creating multiple locations

for where we're storing cash all under our control.

And to just finalize the underwriting side of this

if you think about as the system expands, you know,

from the insurance company's perspective

as your wealth grows, well guess what?

You become eligible for more life insurance.

And so it just makes sense

that you would have multiple policies from that perspective

because now you're simply,

you have a higher human life value,

which is a just an insurance term that gives us an idea

of how much insurance you can actually buy

or how much the insurance company will sell you.

- Awesome.

Well, you have a note in here for expanding the system

chapter 13 of becoming your own banker.

You want to hit on that?

- Yeah, I think John and I were talking before

and we were talking

about how do we think long term,

which is, think long range,

is one of the principles in becoming your own banker.

And of course that makes sense.

We always wanna think long range

and thinking long range is really just a,

it's a bunch of short-term decisions

that are really well coordinated.

And so, but we want to have that long-term perspective

right from the beginning.

And so how do we do that

and how do we set up the structure of our IBC system

so that we have the ability to think long range?

And one of the issues that you could run into

is that we don't know what your insurability

is gonna be in five years or 10 years or 20 years.

And so when it comes time to expand the system

and maybe you've had gotten a car accident

or you had a health issue, whatever it may be,

by the time you get to that point

where you'd like to expand your system,

you may not be able to with life insurance.

And that's one of the kind of caveats

of dealing with life insurance.

And one of the things that makes it so powerful

is that we're actually ensuring something

and that has a value to it, right?

So how can we set up right from the beginning

a structure that has the ability to expand

no matter what happens?

And one of the things

that John Montoya taught me from early on

is buying what's called a convertible term policy.

John, you're probably the best person to talk about this

since you've taught it to me.

- Yeah, absolutely.

So the way that most people buy life insurance

is they buy it as a commodity.

They're thinking about the death benefit.

I want 2 million, 3 million, whatever the case may be,

and whatever the number they're searching for

and they want to pay the least amount for it,

that's a commodity.

You can go to any website and buy life insurance that way.

There's not a whole lot of thought to it.

But when it comes to implementing an IBC system,

that's not the way that we approach it.

We're looking to set up a banking system

where you are funneling either existing assets

and/or your existing income into these policies.

And what's gonna happen is we're not solving

for 1 million, 2 million, 3 million plus in death benefit.

You know, it's not a nice round number.

What we're actually looking to do is redirect your cash flow

or existing assets into these policies.

And what's gonna end up happening

is that we're gonna end up with a smaller death benefit

than how people would traditionally

buy a whole life insurance policy.

As a result, since we're not setting this up

primarily for the largest death benefit possible

on the front end, you're gonna start on day one

with a typical IBC policy that has a lower death benefit

than the traditional commodity-driven way

to buy a life insurance policy.

So the best way to fill in the gap

if you are someone who, you know, you're married,

you got kids, you've got income to protect,

you got loved ones that you want to see

go on graduate high school

and go to the college of their choice,

you have all these financial dreams

that you want to see happen.

Well, maybe that initial IBC policy

doesn't provide the death benefit

that would satisfy all those financial dreams.

Well, that's where a convertible term

would fill in the difference.

John, you mentioned human life value

and you know, solving for the maximum

that the life insurance company will underwrite a person.

Well, in this case,

you have your initial IBC policy

that has a certain amount of death benefit in it,

and it will increase over time.

That's a great benefit about IBC.

It doesn't stay static,

but then you also have a convertible term

which covers the difference

with what you're getting in that first IBC policy

with ultimately what you wish to have.

Maybe it's that 2, 3, 5, $10 million

worth of total death benefit.

And now you've given yourself

that ability to convert that death benefit

at a future time to another whole life policy,

maybe two or three or more whole life policies

all without having to medically qualify again.

So I call that future planning.

- That's awesome.

And yeah, future planning, exactly.

And so that convertible term policy,

it's like buying an option.

You are buying the option to convert.

You don't have to but you can,

you can convert that

into your next whole life insurance policy.

And so there's a lot of, just as a side note,

there's a lot of kind of hoopla out there

if you get on TikTok or YouTube or whatever,

and there's a lot of people

that kind of frame Infinite Banking

as a kind of get rich or buy your dream car

kind of like scheme.

True IBC does not ignore the traditional uses

of life insurance.

It just recognizes there's an additional use.

And so human life value is super important.

And like John mentioned,

if you're married with kids or you got a mortgage,

you should probably

just have a bunch of death benefit as well.

And this is a great way to add to that

and also create the structure you need

to expand your system in the future.

- Agreed.

Now I want you to talk a little bit more

about your type of future planning,

which I think is is really important too

in the conversations that you're having with the people

that you're working with, John.

- Yeah, I mean, very similar to yours.

So, you know, convertible term insurance

is there's an underwriting amount

that someone qualifies for.

And sometimes it actually doesn't happen very often.

Sometimes people can afford to pay the premium

of a whole life insurance policy

for their entire human life value.

And in that case, that's what they get.

They get whole life insurance.

But more often than not

the premiums for whole life insurance

because it's actually building a cash value,

they're much higher than term insurance.

And so people can't always, they don't always

have the cash flow to support their entire human life value

with whole life insurance.

And so if that's the case

I always recommend buying some convertible term insurance

as step one in setting up the IBC structure.

The other place that I have strong opinions about

is setting up the whole life insurance policy itself

to have a long term ability to expand the system.

So, and what I mean by that is,

there's a kind of a fad out there, I guess,

where people in certain circles will go to the mats

saying you need to have maximum PUA

and cash value from day one on your life insurance policy.

And of course, if all things were equal

of course we would want that.

But with life insurance, all things are not equal.

Everything is a trade-off between cost and risk.

And one of the trade-offs

if you completely max out the PUA

and cash value from day one of a life insurance policy

there's no additional kind of room in the policy.

It's like you filled up the bucket

of that life insurance policy,

you can't put anymore in there.

And so when people design their policies that way

it cuts off right from the beginning

the ability to expand your system

in the whole life insurance policy

that you bought right there.

And again, it could be okay

if you have a convertible term policy to back it up

but I would say that, you know,

this is gonna be our next episode.

You know, if you compare sort of like fully funded

where you have no more room in the policy

to a policy that has room, I can very easily prove to you

that a longer term policy that has room

and it will become a much bigger financial asset

than if you take that short term approach

and only focus on that day one cash value.

So my opinion is

that we should design our whole life insurance policies

to have built in room to expand our system

and then we should also have that convertible term insurance

to not only give us additional future expansion

but also to cover our immediate death benefit needs

and cover our human life value to protect our families.

- Yeah, and I think the big takeaway

for our listeners when starting out with IBC

you should not only be asking yourself

where would you like to start today,

but you need to be asking yourself

where should I be five years from now, 10 years from now,

20 years from now in funding my policy?

Because what's gonna happen with inflation

is that your income will naturally increase over time.

We get these costs of living adjustments.

Well, where is that?

Just those increases alone,

not even talking about getting a promotion at work,

where does that extra income go?

But you know, 5, 10, 20 plus years from now

you're gonna be earning more

and you have to have a system that will allow you

to redirect those increases of income into your policies.

So it's a great point that you bring up, John.

- Yeah, you know, if you're in your 30s or 40s,

and you've been working for a little while,

go dig up your W2 from when you were 22, 24 years old

at your first job and what was your income then, right?

And compare that to what your income is now.

So there's an obvious need to have the ability

to expand our system.

Otherwise what ends up happening is all that money,

just like John Montoya said a minute ago,

goes right into you.

It'll go into your bank account

and it'll most likely be spent.

And that's what's happening

with most of the people I talk to.

I mean, of course we have clients that are very good

and they're really paying attention

to what's happening with their money.

And I tell you what,

these people are not, you know, lower income people.

These are Silicon Valley directors, managers, execs

making hundreds of thousands of dollars a year or more.

And I'm telling you, man,

these same people still do not have a great handle

on where their expenses are going.

And so what happens is it also in the book

"Becoming Your Own Banker"

he talks about Parkinson's law where our expenses

tend to inflate along with our income

is one way to describe it.

And that's absolutely true.

And you know, it's hard to,

it's hard not to do it out here in the Bay Area

where things are expensive

but you know, if we can get a handle on that, man,

I tell you what, it makes a huge difference

in terms of being able to, you know, funnel cash

into our IBC system as we become more efficient

and more productive in our lives.

- Absolutely.

Well, to sum up, you know,

how and why more policies when it comes to IBC,

real simple, capital needs a home, right?

And so when we realize that we need to capitalize

in the best place possible,

you're gonna know from listening to us, reading the book,

whole life policies, the IBC system is the greatest place

where you can capitalize for multiple benefits,

for multiple reasons.

Liquidity, access control,

the additional death benefit,

making sure that what you want to have happen financially

is guaranteed to happen.

Another point we always make,

you'll never be in a worse position

by having access to cash.

Boom.

Why wouldn't you want more of these policies?

You know, who doesn't want more access,

more liquidity to funds when it comes to retirement?

Now we're not really focusing on this for this episode

but wouldn't you want more options in retirement?

Well, having multiple policies

will allow you to have more retirement income options.

And last but not least, wouldn't you wanna leave

a more abundant future for your loved ones?

Pretty straightforward.

- After you die and also while you're still alive,

you need to if you haven't yet listened to episode 55

where John's wife Kelly gets on

and talks about everything that she's gone through

with her healthcare in the last year, year and a half,

two years.

And it's incredible.

Definitely give that episode a listen

because it's not all about protecting when you pass along,

it's about having the options available

while you're still alive to still be here with your family.

- Absolutely. Thank you for sharing that.

That little plug for episode 55.

- Excellent.

Well, I think we've hit the nail on the head on this one

once again, John.

- This was a really good episode.

I think our listeners will enjoy it

and have some takeaways from it

that hopefully will lead them to connect with us

because if you're learning about IBC,

knowledge is great

but taking action is even more important.

So be sure you reach out and get started with IBC.

- Absolutely. That's a powerful episode.

So as we wrap up here,

if you're just learning about IBC or whole life insurance

and want to better understand how any of these principles

can apply in your life, specifically,

reach out to us at thefifthedition.com,

right there you can schedule a free 30-minute consultation

with one of us and we'll be happy to walk you through

how it could work for you.