UlTImATE SUccESS GUIdE
your life insurance policy and pay cash for your purchase, then
set up an amortization table in order to pay yourself back, with
interest, just as an outside lender would have required. That is
smart debt management and the part of the “banking” process
that allows you to recapture part of the interest and lost opportu-
nity costs that would otherwise have been paid out to the banks
and credit card companies to your detriment.
Your policy will continue to pay you dividends even when you
take out a loan so you’ll continue to earn the dividend as though
you never borrowed a penny.
- Risk management: There is no stock or real estate market risk.
In some states you also have asset protection from creditors,
predators and frivolous lawsuits.
- Tax planning: Life insurance cash value grows tax deferred and
your basis comes out tax-free when you’re ready to turn it into a
passive income stream when you retire. Once the basis has been
withdrawn, you can then borrow your earnings by switching
the withdrawals to policy loans – which are not a taxable event.
Policy loans would get paid from the death benefit proceeds
plus any accrued interest due once the insured dies.
- Wealth creation: When utilized the way it is advocated, you
can use your financing needs as a wealth-creating strategy by
borrowing the money from your policy to pay cash for your
purchases, and then paying yourself back with interest, just as
an outside lender would require of you.
For example, in the table below I have outlined how a typical
auto loan would be amortized over a period of five years. Pay-
ments are front loaded with interest as you can see illustrated in
the table below. You will also notice that over the five-year re-
payment period, you would have borrowed $15,782 and would
have paid $19,200 of which a total of $3,412 is interest. This re-
sults in over 17 cents of every dollar paid is interest to the bank.
By creating your own personal financing system, you could pay
yourself back the same way you would have paid a bank or
credit card company. Wouldn’t you like to recapture a portion of
