Retirement and The Dividend Paying Life Insurance Money Tree

With dividend paying life insurance you can create an income stream to pay off your car, mortgage and other purchases. Sometimes an idea comes along that seems too good to be true. becoming your own bank using dividend paying life insurance appears at first glance to be one of those.

But after reading Nelson Nash’s book on the subject I am a image believer. Unfortunately in Australia we no longer have this type of insurance. However US Baby Boomers should give it a serious look.

As best I can describe it here is how it works. You take out a life insurance policy that pays you dividends. You pay into it from 4-7 years. The key is that you are the Owner of the policy.

The way insurance companies make money is by lending out the money they take as premiums. As the owner of the policy you have first call on borrowing the money from your own policy.

If you do not need all the money available to you it is lent out to others but the proceeds are placed in your account increasing your capital for future loans.

You make sure you borrow what you need and pay it back in full with interest, That’s another important factor in this process. You should not try to pay the car off on the cheap because it is your money. You should pay it off at market rates or higher in the early years.

Nelson Nash shows an example of purchasing a new car every four years using this method.

Another place to visit is Becoming Your Own Bank. It’s another good site full of information and they offer a service too. They provide a great overview on the infinite banking concept and explain dividends. The diagram below is from the site.

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The benefit of this type of transaction is you are paying yourself the interest on the car pavements that you would have paid to a finance company. Over time the process becomes self-funding if you manage it according to Nelson’s rules.

Also because the loan is given to you as return of capital, there is no tax.

The infinite banking concept comes from the fact that you can set up life insurance policies for a host of purchases from cars to mortgages. You can take out life insurance on each family member and use the dividends to finance other purchases for you or your family.

There appears to be no reason why you cannot start several policies at once to speed up the process of getting the initial capital together to get to the point where it starts to become self funding.

Please note dividends is not the same as dividends in stocks. It’s use goes back 200 years and is to do with the return of capital not payment of some of the profits. This is important to note.

The beauty of this system is you own the policy not the insurance company. You control the money in the policy, not the insurance company. You decide to use the money for your own purchases or you allow the insurance company to lend it to others. Apart from administration fees the interest is paid into the policy account you own and control.

How much better is it than giving your nest egg to a wealth manager to control. You really don’t know how much they are making with your money. You don’t know how much they are taking out before they tell you your unit price. You don’t control your own capital.

I strongly recommend you get the eBook, “Becoming Your Own Banker“. It may not be the latest edition but it clearly explains the concept. Then find a coach who can help you set your first infinite bank up.

5 Responses to “Retirement and The Dividend Paying Life Insurance Money Tree”

  1. aussieguy says:

    Can you tell me when these insurance policies where phased out and why?

    There has to be a way for aussies to do this.

  2. admin says:

    Hi Aussieguy,

    I spoke with someon at AMP when I was writing this post becasue i was told they still had such policies.
    However the do not offer them anymore.
    The reasons as far as i recall are they were expensive and the current insurance policy is a much cheaper option. They also mentioned that the newer policies are in line the with introduction of superannuation.
    I personally think the insurance companies stopped them because you had first call on the money in those policies and may well have been able to set up your own bank as discussed in the post.
    With the introduction of superannuation the insurance companies got to control the money. The new insurance polices are sold as low cost but are they really if you lose the ability to set up your own bank and you lose the control you once had on the premiums and the interest accrued?

    I spoke at length to the guy at the AMP and there is no way in Oz to do this unfortunately.
    I also emailed Nelson Nash at the time because I was going to buy his book
    and he said the same thing.

    Regards,

    David Bates

  3. […] have written three posts on how to set up your own bank. The best known book is by Nelson Nash and Becoming Your Own Bank entitled, “Becoming Your Own […]

  4. David Robertson says:

    Well that’s blown me away…. I got all excited about this and I live in Oz too.
    I read the book cover to cover without a break (except to make coffee!)
    I even considered getting a job in life insurance so I could make money both ways!
    I still believe it CAN be done here, there HAS to be a Company that will do it and if there is NOT, now is the chance for a very SMART enterpreneur to start one up here, we all promise to buy your policies!!!!! Come on guys, it can’t be that simple, OZ is the LUCKY country remember…. so be bgrd if I’m gonna let those in Control STAY in Control of MY life. If there is no way to do it here…. I will LEAVE the country! Any Insurance Aompanies in USA willing to start up branches in Oz, we don’t CARE if the money goes out of our blessed country as long as we can have what you have over there.
    AMP…. FORGET about them, they’re obviously losers without balls if they have buckled under the pressure, hey I thought MONEY WAS POWER????? Don’t AMP have any?
    Sorry guys, only kidding ’bout the “losers” bit!
    Cheers, David

  5. admin says:

    David,

    Sorry for the disappointment. I think the thing is the insurance companies have their own wealth management arms and prefer to put your money at risk in a managed fund than you have control of it an insurance policy with them giving you a dividend.

    They also said the dividend paying life insurance was too expensive so was not popular in Oz. But if we had known we could set up our own bank then ……

    Regards,

    David

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