I was under the very same notion and understanding in my own mind that all my money was growing inside of my policies. And when Nelson said, "People can take a tiny bit of information and reach an absurd conclusion. " There's no better example of this than the misunderstanding of dividend paying life insurance out there.
I didn't understand what he meant. I used to say the same thing like, "Yeah, look at all the money that I've got growing in the policy. " You know, the more you see, the more you see you didn't see.
Let's start with something that might sound a little uncomfortable. So, if you've ever heard someone say, "Your money is growing inside your whole life policy. " Or maybe you've even said to someone, "My money is growing inside my whole life policy.
" That's not actually true. And I can acknowledge that might sting a little bit, especially for folks who have been talking about this for a very long time. I'm 19 years into my journey of implementing the Infinite Banking Concept.
77 policies in our family banking system, $1. 5 million in annual premium, and 6,500 plus clients coast to coast in Canada, sea to shining sea in the United States. And if that were true, if your money was actually growing inside the policy, it would feel more like a savings account.
And some of the smartest people I've ever met believe that their money is growing inside the policy. I'm talking about business owners, advisers, engineers, spreadsheet warriors. And it's just casually said, "Yeah, hey, my money is just compounding inside of my dividend paying whole life policy.
" And respectfully, your money left the building the moment you paid the premium. And so today, Ash and I, we're not here to tear anything down. We're just here to clean it up.
Because when you actually understand what cash value truly is, you'll stop treating it like a savings account and you'll understand that what you have is a system. And that changes everything. Welcome back to the Command Post where Ash and I don't just talk about money, we talk about how it actually works.
If you're into conversations that challenge how you think about money, not just sensationalize it or hype it up, then hit subscribe. And throughout this episode, if something hits you sideways, drop a comment. Even if it's just, "Okay, I get it.
I've been saying this wrong for 10 years. " You won't be alone. Ash, let's talk about this.
The phrase, "My money is growing inside of my policy. " Why it sounds right, but it just isn't. Well, I would say cash value is a ledger entry on the life insurance company's books.
Very similar to banks — when you deposit your money with a bank, that's not an asset, that's a liability for them. Their assets are when you borrow money from them and they receive interest payments from you. When you say it's a ledger entry, it's an accounting of the strength of a policy at any given moment in time.
You've got a death benefit, you have the net present value of the future payment of that death benefit, which is in fact the cash value. That's why words have meaning. The life insurance company aptly named it cash value, not cash balance.
There's no money growing inside the policy. I can't emphasize that enough. When you pay premium to the life insurance company, that is not your money anymore.
When you leave money at the corner bank and it's on deposit, that is an on-demand deposit. It's not your money anymore. You don't deposit money into a dividend paying whole life insurance contract.
What you're doing is paying a premium in exchange for acquiring a contract that has legally binding rights. That's what you're paying for. Treat this more like you're starting a business.
You're going to need capital. You're going to need time for it to become efficient. Cash value is a contractual entitlement.
It's not a pile of money that the life insurance company keeps stacking on. It's a ledger entry. You can access money from the life insurance company without reducing the value of the asset you're borrowing against.
The money that you're accessing is the life insurance company's money and always has been the moment you paid the premium. Nelson described this arrangement brilliantly in Becoming Your Own Banker. On page 69 he wrote: it is just like a trust agreement.
A trust has a grantor, a trustee, and a beneficiary. The grantor puts property into a trust. The trustee takes possession and title to all the property in the trust.
The trustee puts the property to work for the benefit of the grantor. Who is the grantor? The policy owner — the one paying the premium.
Who is the trustee? The life insurance company. The trustee has a contractually binding obligation to the grantor and the beneficiary.
Ridiculously simple. The policy owner outranks everybody. The policy owner can access the equivalent of 90% of the equity that has accumulated in the contract as a value.
The policy loan is one of the best invested assets on their balance sheet. The return is guaranteed. Do you know who else likes the guarantees on these contracts?
Banks. Do what they do, not what they advertise to you you should do. If you just deconstruct exactly what banks are doing and find out you have the ability to do the same thing — would you also be successful?
All day long. A 40-year-old male puts $26,000 into a contract. At year 9, the annual increase in cash value was $39,434.
The premium paid was still $26,000. What's happening is the strength of this contract is improving daily. The net amount at risk to the insurance company is going down, not up.
The contractual guarantee is that total cash value must match total death benefit by age 100 in Canada and age 121 in the United States. Control and liquidity when exercised properly is a remarkable advantage. Six years ago an opportunity tracked me down.
What did Nelson say about what happens when you have ready access to capital? Opportunities will track you down. I invested $1.
2 million using the life insurance company's money. My cash value continued rising for 2,190 days — 6 years. The life insurance company didn't ask me what I needed $1.
2 million for. No income verification. No credit check.
That business pays me $90,000 every 90 days in dividends. My return on capital is explicitly infinite. I control the repayment schedule.
I decide when and how the loan gets repaid. When premium dollars go to work, those dollars do more than one job. It is not a right.
If we qualify, it is a privilege. Your money must reside somewhere. What better place to have it reside than here?
Someone and some organization must perform the banking function. That someone should be you. That organization should be the life insurance company.
The life insurance company cannot inflate their money supply. When you borrow from a conventional bank, you've contributed to inflation. The bank simply created money where no money existed before.
The life insurance company cannot do that. The more you see, the more you'll see you didn't see. This book is not about investments of any kind.
It is about how one finances the things of life. It is not about rates of return. The process of banking goes on no matter what.
Mic drop. There is no money growing inside your policy. It's not sitting there.
If you've got that one friend or adviser who keeps saying all your money is growing inside your policy — send them this episode. Just send it. Knowing this and implementing it are not the same thing.
Go to learnwithjay. com to discover more about how this plays out in real life. Although this will benefit everyone, it is not for everyone.
Well, on that note — can't wait for the next one.
