Nelson Nash’s Becoming Your Own Banker: Part V, Lesson 8, What if I am Uninsurable?


Content: Page 82-84, BECOMING YOUR OWN BANKER – The Infinite Banking Concept.

AND others have asked, “What if I am uninsurable? After all, not everyone is blessed with perfect health.” For those people, consider this possibility: Father is 50 years old and is uninsurable — or highly “rated” — on account of occupation or poor health. He wants to adopt the Infinite Banking Concept to provide “passive income” at his age 70 for the balance of his life. Please notice that I did not say “retirement” income — I’m dropping that word from my vocabulary. Passive income is money that comes in every year and you don’t have to do anything to receive it. In fact, you can’t do anything about it — it just appears!

Mother agrees that this is a worthy goal. She is about the same age as her husband and they have a 23-year-old daughter, Jill, who is in excellent health.

To accomplish their goal, they decide to put $20,000 per year into a policy on Jill. $10,000 will go into the base policy (Life Paid-Up at age 64) and $10,000 into a Paid-Up Additions Rider. [Illustration is on pages 83-84 in Becoming Your Own Banker]

They do this for twenty years and Father is now age 70. At this point they decide to cease premium payments and to start drawing “passive income” in the amount of $28,500 per year. This is done by surrendering cash values of Paid-Up Additions. This income is tax-free until the amount withdrawn equals the cost basis of the policy (the premiums paid out).

Fifteen years later Father is 85 years old and has drawn out cash values of dividend additions equal to the premiums paid into the policy. He has no cost basis at all. If he is still living at this point, and wants to continue receiving tax-free income, he could simply switch to policy loans which are income tax-free.

Assume that he dies at age 85. Note that the cash value of the policy is $1,110,726. This sounds like life insurance on Father, doesn’t it? Father paid premiums for 20 years — then withdrew every dollar paid out — on a tax-free basis — and delivered $1,110,726 to his daughter at her age 57.

In this illustration, the assumption is that Jill simply let the insurance company manage the policy for the remainder of her life. Therefore, no additional premiums — and at her age 70 she decides to surrender cash values of dividend additions in the amount of $150,000 for the balance of her life.

Assume her death at age 90 — and she has withdrawn “passive income” totaling $3,150,000 — and she still delivered a $2,378,391 death benefit to the next generation.