Whole Life vs. UL/IUL: Why Guarantees Win (Ep. 247)

“You’re sitting in your recliner not doing anything? And then you’re questioning me because my viewpoint doesn’t align with your viewpoint? Where’d you hear infinite banking works? Where’d you hear that it didn’t work? Provide your sources. What are you talking about? People have gotten so lazy that we just want to believe what everybody else is doing. And we’re believing the person whose car is broke down on the side of the road. And they’re saying Toyota Camry suck. Don’t go buy a Toyota Camry because this thing sucks. I’m broke down on the side of the road. Meanwhile, they didn’t change the oil. Meanwhile, somebody else has a Toyota Camry with a half a million miles on it. And they’re like, this is the best car I’ve ever had.”

Hello, and welcome back to the podcast. Thank you very much for being here. All right. Today, we are getting into creating your own banking system through dividend-paying whole life. It’s a big chapter. Are you ready?

Ready.

As you can tell, we’ve been batching these. We’re hyping ourselves up.

Not that we’re not excited about the infinite banking concept, but we’re very excited.

Yeah. The new studio is quite cozy. And we all just want to nap at the moment.

Okay. I like the quote here. “You should have put my money on deposit with the bankers so that when I returned, I would have received it back with interest.” Matthew 25:27.

I like that. Because even in the Bible, like, what are you doing? Putting it, burying it. What were you thinking? That is not what you should have done with the money. And so, obviously, Nelson talks about that it should be moving all the time. He says that the business of a bank originally restricted to money changing, and it is now devoted to taking money on deposit subject to check or draft, loaning money on credit, and any other associated form of general dealing in money or credit. So, that is the dictionary definition. You finance everything that you buy. You either pay interest to someone else or you give up interest you could have earned otherwise.

Huh. That’s a new statement I’ve not heard before. I think we should talk about this. Because I think that it’s very easy to not fully grasp this concept. So, how would you put this in Mary Jo’s terms to help people understand this simply? That you either pay interest or give up interest?

Mm-hmm.

Like, how am I giving up interest if I pay cash?

Because you couldn’t put it in the policy to earn compound interest and dividends. You couldn’t put it in an IRA to earn interest. You couldn’t do anything else with it. It did one thing. It bought a car. It bought a house. It did one thing.

So, it’s like that’s the ending of that dollar’s earning potential.

Correct.

Like, I traded the dollar for the car, or I traded the dollar for the groceries, or whatever it is.

Yep. So, if I started a business with that cash, that business has earning potential, right? So, you could argue with me and say, “Well, Mary Jo, you’re not telling the full story. I started a business, and now that’s earning me interest.” But I started a business by borrowing my cash value. And so, now that policy is continuing to earn interest, and the business is earning something. So, I didn’t finance it through the bank because that’s lost interest. But I am earning compound interest and dividends, and I have the business making money. So, you’re either going to pay an institution an interest, a credit card company, a lender, a bank. You’re going to pay them interest, or your money is gone in exchange for something else, and you lost the ability to have guaranteed uninterrupted compound interest through the policy.

That was a great answer. Okay. And the reason why I wanted to ask you that question is because it took me a while to wrap my head around this concept when I was first learning it. I’m like, what does that even mean? But I think just realizing that there’s a cost to your decisions, and you are stopping the momentum of your money, whether you pay cash or finance.

Okay. So, then he goes into this idea of EVA. So, basically, what he was saying is that these businesses were using their money and not paying themselves interest for it. They weren’t realizing that their money had a cost to it. But they were happy to pay interest to banking organizations. And as soon as they realized that, that their cash came at a cost, and they started appropriating the amount that they needed to in order to recognize the cost of their capital, their business did so much better.

Yep. And he says, EVA’s basic premise is, if you know what’s really happening, you will know what to do. The same thing applies to the infinite banking concept. You have to know what’s happening. And this is why some people just don’t really understand this, is because they don’t truly maybe understand what’s happening. They don’t understand the bank control. They don’t understand the government control and retirement plans. They don’t understand any of that because they’ve not experienced it. And so, we don’t really know what’s happening. We don’t maybe believe it’s going to happen to us. Right? And so, we have to, once you understand that, it’s like a switch that goes off. And you’re like, wow. Yeah, I’m not going to lose access to that money. But if EVA is important to businesses and successful people, why do you think it shouldn’t be important to you?

I remember there was a podcast of yours I was listening to, and you’re like, you could do this concept with a shoebox. And it’s like, yeah, you just make that payment to yourself with interest in a shoebox. Like, the environment that we get to do this in is what makes it so much better. But the principles are the same successfully.

The concept is the same.

Yeah.

Take from your savings account and pay it back plus interest. If we just taught our kids that, that 97% of Americans that struggle would not be struggling because they would have this interest. They would understand that they have to be honest because that’s the piece that is the hardest for people to get, is why would I pay back extra interest? So if we did that through a savings account or a shoebox or a mattress, or I don’t care where you put it, but you’ve got the concept down. The tool is the leverage to earn the compound interest and dividends. Life insurance is the only tool that allows that. If there was a different tool, it would probably be easier for us to explain this.

Yeah, I agree. You know, I think people just hear life insurance and they just kind of power down.

Yep, they do. Because we’re listening to a bunch of people outside that have no idea what they’re talking about. And this is what we talked about at lunch. The fact that as a society, we have quit thinking. We’ve quit discerning. We’ve quit doing due diligence. We have just completely stopped. I also thought this was a scam. When I first heard about it, I’m like, there is no way. There is absolutely no way that this is true. But I did my due diligence. I’m not going to just buy whatever somebody is telling me and saying, “Oh, no, that’s a scam. Don’t bother doing it.”

Well, I kind of have the opposite journey because I had seen my dad’s 401(k) not work out for him when he needed access to money. Like, how is he getting penalized for accessing his own money because he needs it before he’s 65? That to me felt like a scam. I’m like, that feels unreasonable.

Well, that also was scammy to me because I lost half of mine in ’08 and ’09. And so I was super mad about that. But at the same time, it’s like, well, this has come across and nobody, nobody is talking about it. Everybody I talk to calls it a scam. I read the book. I don’t 100% understand it. But I agree with a lot of it. And I just had to do my due diligence. And so a lot of times we’re too lazy to do that. I saw somebody say this on social media because I like to read a lot of things. I like to listen to a lot of things. I really like to get as much information about everything as I possibly can, as long as I’m interested. Right. Y’all know. Don’t talk to me about fishing. I don’t care what kind of tackle you use. Like, there are some things that I have a limit on.

When he goes further, he talks about how the policy has to be engineered correctly. Right. It’s like engineering an automobile. And we can buy the exact same vehicles. But mine may last shorter time than yours. Vice versa. It just depends. And that is because of how we drive it, how we care for it. How often do you change your oil? What kind of oil do you use? All of those things are going to matter. And yet we’re saying, well, life insurance didn’t work for you, but it worked for me. Well, how can the infinite banking concept work for one person, but it can’t work for the other?

And I see this a lot when we talked about, in an earlier podcast, we talked about the accountant who said, “Well, that didn’t work for me.” You engineered that thing so incorrectly. You didn’t even do your due diligence to figure out exactly what you were doing and how to do it correctly. And now you’re saying that doesn’t work. So that’s your general message to the world. And you are a professional that’s licensed. And you’re telling people that that doesn’t work. And so we have to really consider too, it doesn’t matter what it is, how much due diligence was done. What are they listening to? What was the experience?

And so a lot of people will say, “I hate whole life because my mom bought whole life insurance and she died without it.” She bought universal life insurance and it ate itself up. And that’s why she died without it. And so we can’t just lump it all together and say, “Oh, it’s all bad.” It’s not all bad. It’s bad when we have the wrong product and we have an agent that doesn’t understand. But it’s not all bad.

Everybody’s is going to perform differently. If I don’t pay more interest back to myself and you do, you’re going to have a better vehicle long term than I’m going to have for retirement because you’ve paid it back. If you let your money sit in your life insurance policy as a savings account and I use mine to buy cash-flowing assets, I’m going to have better use of mine and I’m going to look like mine is doing me more favors than you because you’re just using yours as a savings account. So how are you using that vehicle? We can’t just lump sum say, “Oh, it was bad.” Do we really want to listen to everybody else to make our decisions or do we want to do the work?

Right.

So I just recently saw a post that was great. Somebody was sharing something and they were mad and they said, “You know, here’s the deal. Don’t ask me where I found my source. Go out and find it yourself because I had to. Stop asking everything to be handed over to you.” And that is so right. I get so mad when people are like, “Well, where’d you hear that?” On a billion things I listened to. Why should I just hand over all my sources? You’re sitting in your recliner not doing anything. And then you’re questioning me because my viewpoint doesn’t align with your viewpoint. Where’d you hear infinite banking works? Where’d you hear that it didn’t work? Provide your sources.

Right.

What are you talking about? People have gotten so lazy that we just want to believe what everybody else is doing. And we’re believing the person whose car is broke down on the side of the road. And they’re saying Toyota Camry suck.

Right.

Don’t go buy a Toyota Camry because this thing sucks. I’m broke down on the side of the road. Meanwhile, they didn’t change the oil. Meanwhile, somebody else has a Toyota Camry with a half a million miles on it. And they’re like, this is the best car I’ve ever had.

Well, this really all boils down to, like, accountability. It’s like the system works. The tool works. When it doesn’t work is when you have human error.

Right. And there’s human error in everything.

There is.

Right. I used to drive like a maniac. Gee, I wonder why my engines were never great. Why is my oil always mixing with my gas? Because I’m blowing gaskets. Because I’m not letting it warm up. I’m taking off like a crazy lady from a stop sign in a stoplight. Like, drive like a normal person. Let up on the gas a little bit. Gee, now my vehicles last longer. Isn’t that fun? Isn’t that interesting? It’s the same thing with a policy. But I didn’t ask somebody broke down on the side of the road why my vehicle is always acting up. I asked the mechanic who works on vehicles and knows vehicles. Right. I did. I didn’t have to do any due diligence in that, in that regard. But had I needed to, I would have. And so I think that’s a good point that Nelson is making.

Yes. I think there is so much power in making your own informed decision based off of credible research.

And I think we talked about just what it costs to start a life insurance company. And so he goes over it here. The engineers in life insurance are also known as actuaries. Then they turn their information over to rate makers who determine what the company is going to have to charge clients in order to be able to pay the death claims and make the whole system work over a period of time. Then the whole matter is turned over to lawyers to make legal binding contracts. Then they need somebody to answer phones and do all the other stuff. Right.

But he says in here, the contract is unilateral. That is a company’s promise to do certain things if you meet the standards and acceptability to make premium payments. You are the owner of the contract, not the company. The owner is the most important character in the scene. To make a plan work, the owner must make the payments into the company. And the company must put the money to work in order to produce the benefits that are promised. And so when we’re going to start, if we’re going to start a life insurance company, it’s not just that easy. Right. They have all these people along the way.

One place that is speculative that some companies do invest is in real estate developments and joint ventures with other private organizations. So when we look at a portfolio of the company, I’m looking at what they’re investing in. And they’re investing in real estate, bonds, and then small other things that make up the rest of their portfolio. But the majority of those are in secure assets.

In this contract, owners outrank every potential borrower in access to the money that must be lent. So if you want it first, you get to borrow it first. You’re first in line. Then they will use it if you’re not using it. But they always have in reserves, in their general account, they always have what they need to lend out.

These two things, when I read them at first, that you own the contract and that you are first in line for your own money, I’m like, well, those are two things that I don’t have currently with how I’m banking. I’m not the owner of Chase or part owner of it. I’m not receiving a dividend from them. But they’re receiving my deposits. They’re receiving the product that they sell every day to other people from me. And I don’t know if I’m first in line for my own money. Because if I go to try to make a large withdrawal, do they give it to me right away?

They’re going to say, “Thank you, Tarisa. You can come back in two days because we don’t have that much money in the bank. And so we’re going to need to go get that.”

Exactly. So I’m like, this sounds so much better than what I’m actively doing already. And I like that I have the autonomy and the control over this environment. And then he goes to say, and what he can borrow is 100% of his equity in the contract. And it’s like, if you have a fully paid off house, and you try to do a cash-out refinance or to get a line of credit against it, they don’t give you 100% equity.

And I think the other important piece here is that if you have whole life, you have access to basically 90% of your cash value.

95% of your cash value.

Depending on how you fund it.

Yes. Depending on how it’s structured, whatever. But typically insurance companies are just going to hold back what they need for interest. But the rest of it is available. So it’s 95, 94, 96, depending on interest rate. What people don’t understand is when they buy universal life policies, you don’t have access to all that money. There’s a 15 to 20 years surrender period. And so you might have access to 80%, 70%, depending on none of it. Really, year one, you don’t have access to anything in cash value because there’s a surrender charge. And so when you’re buying universal life, you don’t have access to all your money for 15 to 20 years. In whole life, you have access to all of the cash value available day one. Very different. And anybody that comes to me with universal life policy does not understand that. They’re like, “Well, is there a penalty to borrow?” Is there a penalty for what? There’s no penalty in whole life. You have access to cash value. In universal life, you have a surrender period.

That is good to know.

As a result of the foregoing, there is an ever-increasing pool of money. So the insurance company is putting this money to work. People are paying premium. This pool of money is constantly increasing. And then he goes on to say some other stuff. And he says, an actuary is a kind of engineer that, all engineers overbuild everything they design. They are going to build in a fudge factor to the equation. So what he’s saying there is the actuary is going to say, we’re going to figure more people are going to die. So less people are going to die than they planned for. So now we have this return of premium.

So we have talking heads out there that, this drives me crazy. They’re like, “Well, you overpaid for insurance. When you buy whole life insurance, you’ve overpaid.” No, you did not overpay. They overestimated their deaths. So let’s look at a year like COVID. It was not a blip on any of these life insurance companies. So yes, there was a video going around with OneAmerica’s CEO that he said the death benefit rates are up. Yes, they were up with group term insurance, not whole life. So let’s talk about that. Because I talked to him about this. I’m like, “Hey, you’re TikTok famous, Scott.” And he’s like, “Yeah, I know. I didn’t even have to dance for it.”

I would like to see that.

Scott probably would. So what happens is with group term insurance, you don’t have to go through underwriting. You get hired for a job. They put you in this pool. And they try to mitigate that pool the best they can without any kind of underwriting. When you buy private whole life insurance, it is extensive underwriting. It is a health exam. It is blood work. It is a urine sample. It is medical records for five to 10 years. It is ever. Have you ever done X, Y, and Z? Okay. It is extensive. They can mitigate that risk far better than they can mitigate a risk for group term insurance.

And so what was happening during COVID is the group term was up because people were sick. They weren’t underwritten. Right. So there were more deaths over there. There were some deaths within the whole life piece as well, the private piece. But when I talked to the insurance companies, and they all said this at Think Tank, because the insurance companies speak to us at Think Tank, none of them, none of them did it even make a blip on their radar. Because actually, they have so many deaths figured in that it doesn’t affect them. And I would much rather have that fudge factor Nelson is talking about than not have a fudge factor and be like, “Oh, my God, now the insurance company is financially not in a good spot. We need more premium from you.” So when they give it back to us in the form of a dividend, it is a return of premium because they have figured more deaths than necessary. So if you want a really crappy company, then you by all means go with the talking heads and go with a company that doesn’t have that fudge factor figured in.

And Nelson talks about a plane in here and their fudge factor for in the red and all the plane stuff. Clearly, one of the topics I don’t care to learn about. But that is what is important is even in our cars, right? There’s probably a fudge factor figured into how much gas before we run out.

I’m hoping there’s a fudge factor because when I get low, I’m like, how long can I make it?

Yeah. Is it really going to go another 20 miles or is it actually 25? I guess I don’t really want to find out, but someday we might have to find out.

I like that he goes on to say, furthermore, the policy is engineered to become more efficient every year, no matter what happens. That is, if the owner does what is called for in premium paying loan repayments plus interest, thereon there are at least equal to or better than the general investment portfolio of the company. That is because the cash value is guaranteed to ultimately reach the face amount of the policy by age 100 of the insured. There’s an ever-decreasing net amount at risk for the company.

So this is kind of fun because I think a lot of people don’t know this, but what happens if I live past, because my contracts go to age 121 that I have on myself personally. So what happens if I turn 122?

The death benefit gets paid out to you and it’s taxable.

It’s taxable. So hopefully I…

The policy endows.

What Nelson is talking about is at age 100, age 121, age 95, there’s different policies out there. But at the end of that policy, that policy endows. The death benefit and the cash value have to equal one another. And the other thing that people don’t understand, and it makes sense right here, is that they say, “Well, I want my cash value and my death benefit when I die.” No, your cash value is a portion of the death benefit you get to use while you’re alive. Okay. That’s not technically how to explain it, but that is easy layman’s terms. It’s like when you sell your home, you don’t get the equity and the cash. It’s the same thing.

But when we look at the policy, and Nelson went on to say that what happens in the later years, they’re mitigating risk, right? So as your death benefit is going up, so is your cash value. And eventually, cash value catches death benefit. So if you live to 121, your cash value will be the same as your death benefit, because it’s meant to do that. So when you look at cash value, they’re giving you a little more and a little more and a little more. The closer you get to death, you get access to more of that death benefit. And people think because talking heads are like, “Oh, it’s terrible. You don’t get the cash value. The insurance company keeps it.” No, they’re actually quite the opposite. They’re being super generous by saying, “Hey, I’ll borrow you some of that. I’ll lend you some of your death benefit because you didn’t die yet. So I’ll let you have access to some. If you do die, we’re just going to take that back out of your death benefit because we gave it to you early.” It’s like somebody going in and saying, “Hey, can I have my paycheck early because I really need it?” Well, you don’t get your full paycheck the next paycheck.

You know, okay, but what about a UL or IUL? Do those policy, do those types of policies endow?

They’re supposed to. If the rate of return is correct, if we’ve put enough premium in, if we have enough going to base, if the fees and charges haven’t gone up, they’re supposed to endow. They’re a permanent life insurance policy. They’re not guaranteed to endow like a whole life policy.

And I think that that’s when I first learned that, that was a really big turning point for me of, like, okay, this is the environment that I want my money in because I’m interested in guarantees.

Yes. Tris and I aren’t going to the casino. It’s not happening.

We’re not? I hate gambling. I would rather go shopping or eat a nice meal.

I’m not here for the what-ifs. And a universal life and a variable life are very much what-ifs.

Right. Because there’s always, I think, a lever that can be adjusted so that they don’t necessarily have to pay the claim or that you have to prop it up with premium.

Mm-hmm.

He says there are variations in interest earnings, death claims, and expenses of operations, and these factors affect the dividend scale. You can safely say that the real results will never exactly match the illustration provided at the beginning of the life of the policy. Once a dividend is declared, its value is guaranteed from that point on. It can never lose value in the future, as can the value of securities.

And so I think, again, people that don’t understand the dividends and what’s happening here, that there’s a scale, but there’s also a formula to these dividends. You can safely say that the results will never exactly match. Nelson used to say illustrations are las, las, and las. Because you don’t, the second that that dividend is paid, it becomes guaranteed. It moves over to the guaranteed side of the illustration, and it’s assumed. They have to pay that now. So your guarantee column is always good. Your non-guarantee column that shows the dividends is just a projection. Is that going to happen? Is it not going to happen? This is where insurance companies can play games. And they can say, “Oh, I’m going to project more so you can sell more life insurance policies against company B because we’re better.” What actually got paid out? So we talk about average and actual a lot. When we talk about investments, it’s the same thing with life insurance illustrations. What is actually getting paid out? Is this company notorious for over-illustrating dividends? Or are they right on key? This is one reason we like OneAmerica.

Yeah.

Because they are very conservative, and they typically underestimate, or they’re very almost dead on. I’ve seen other companies that are 30% off. And that’s huge.

Yeah. That makes a big difference.

I’ll just point out again, that dividend moving to the guaranteed side is big. Like, when I run in-force illustrations for clients, they’re looking on the non-guaranteed side. And it’s always going to be very close. But then I lead them and say, “Hey, look at the guaranteed side compared to where you were.” Massive difference. Because those dividends have been moved over and assumed. And now you have interest earned on higher guarantees than what were illustrated.

Yeah. So you can effectively change your illustration, like, for the better if you continue to overfund and pay additional premium inside of your policy. Because the more premium you pay, the more dividends you get.

Exactly.

I like this where he talks about if the company has, like, a downturn or earnings of interest or period of more than expected death claims and administrative expenses, results in a downer for the company. When this happens in a regular corporation, it is a function of the stockholders to take up the slack. But in this case, the rate makers are reminded that we don’t have any stockholders. So the rate makers are cautioned by the actuaries that if we calculate that it would require $1 per year for a given plan, don’t collect $1, collect $1.10. This extra 10 cents is the capital that makes the whole system viable. So what he’s saying in here is, like, even if there is a downturn and, like, they have more deaths than expected in any given year, they have built in that fudge factor. Because if you’re thinking about life insurance companies, the successful ones have been in business for hundreds of years. So they are very conservative in how they operate. Because if they’re halfway smart, they will take into consideration that they need to put part of this into a contingency fund to prepare for unexpected future risks. And so we should be doing the same in our personal finances.

Why are we upset that the insurance company is preparing for the worst? During COVID, no one life insurance company went under because they were prepared for the worst. It’s their job. They’re not risk takers. When we go to an event with life insurance companies, they don’t go to the casino. People that, actuaries and all those people are not going to take that risk. Right? They take our money seriously. Unlike financial advisors, who are like, “Oh, I’m just going to throw it in this fund and we’ll see what happens.” Right? We expect the insurance company to make money. We don’t expect the financial advisor to make money. There’s something wrong with that.

That’s problematic.

The fact that we have been told that this is just how financial advisors work, that we’re going to lose money, the stocks go up and down. You are expected to not have an upturn every single year. That is what you are led to believe. On the life insurance company side, you are led to believe that you are going to make money every year and that is your expectation. We have set the expectations in those industries. I think I’ll go with the one where I’m expected to make money.

Guaranteed.

Yeah.

Like, what is the guarantee of most financial products? None.

Right. Because it’s based off of so many things that you can’t individually control. Right. And I tell people, like, if your financial advisor doesn’t like this because he can get a better rate of return than a measly life insurance policy, then ask him what your guaranteed is. What are you guaranteed to make every single year, year over year? Well, they don’t have one. Well, okay. Then we’re not even talking about the same thing. Why are we even having that discussion?

And the dividend is a non-taxable event. The reason why is because it is coded in the tax code as an overpayment of life insurance premium. That’s just how the tax code was written.

Wow.

Life insurance existed ahead of it. So bonus. We’re using the tax code correctly. Go us. There’s a bunch of winners over here.

And then if the owner uses the dividend to purchase more additional paid-up insurance, the result is an ever-increasing tax-deferred accumulation of cash values. So now we don’t get paid a dividend in cash. We can take the dividend in a check format if we wanted to. But ideally, we’re going to take the dividend and we’re going to buy more insurance with it so that it, what, goes into cash value and creates more compound interest and more dividends. And we can get that in through the policy without having to worry about the modified endowment contract, which we will get into later. But that’s huge.

We also should talk about, and we talked about this in our agent training, the load fees on paid-up additions. And I’m not going to get deep into this, but every time you give the company a dollar, there’s a percentage of it that is going to go buy death benefit. You’ve got to buy death benefit with it. When you do paid-up additions or when they, when the dividend buys more PUAs, you don’t have that expense. I haven’t quite got the answer to why that is yet. But when you put it in out of pocket, there’s that expense to buy death benefit. When it’s purchased within the company with a dividend, there is not that expense. So you want those dividends to buy more death benefit because it’s like the best buy that you’re going to get.

It’s a good deal.

Yes. And Nelson took his dividends for three years just to prove to people that you could do that. And then he quit because he’s losing money. He’s losing the power of compounding on those dividend checks.

He goes down to say, I bought a policy from a major insurance company in 1959 and the annual dividend is over 10 times the annual premium now. There’s your rate of return.

Right. Right. It took him a long time to get there. Right. From ’59 to 2000. We can look at what the projected dividends are going to be and they’re going to be way more than the premium as well because the power, it’s the power of compounding. Uninterrupted compounding.

Yeah. And then he said they would have been much larger had I not used the annual dividend to reduce premiums for the first 15 years. So I think this is key because he was essentially looking at, okay, I know this is great for my future and for my family and for my money, but I want to reduce my expense, my premium expense. But what he’s saying here is that he’s kind of limited his capacity of his policy because he decided to do that. He could have made it more efficient. But lucky for us, we have that information.

Hey, on the next page, I’m just going to talk about it because we’ve already said it, but I’m going to, I’m going to point it out because he says it again. Our need for finance is greater than our need for life insurance. If we solve the need for finance through dividend-paying life insurance, he would automatically have more life insurance and recover the interest he was paying to someone else. Again, I remind you, if you know what’s really happening, you know what to do.

And then he says, the young man puts $50 per month into life insurance and feels that he is insurance poor. He is worth more dead than alive. Then he goes down to the dealer and buys an automobile, paying for it with a loan from the bank or finance company. Remember that there is only one pool of money out there in the world. The fact that any number of organizations or individuals are managing a portion of this pool is incidental. I have never seen a monthly list of investments from a dozen major insurance companies that did not include finance companies as a place where they have loaned blocks of money. The finance company simply buys blocks of money, adds a fee to it, and loans it to the consumer to buy cars.

So your car dealers are financing it for you. If they’re not financing it through a bank, where are they getting it? From insurance companies or from banks, because there’s one pool of money and there’s only a handful of people that manage that pool of money.

So essentially, in participating in this process, we’re kind of effectively cutting out…

We’re cutting out the third party.

Absolutely. Right.

Absolutely. He complains about the premium he pays, but thinks nothing of the much larger amount he pays to the automobile finance company. If you could muster up the courage to pay the $310 directly to the life insurance company in the form of a premium for around four years, he could have made a policy loan and paid cash for the automobile. He could have borrowed from the policy and paid cash and not had to go to a third party to get the money from the life insurance company.

The insurance company is not doing it right now, I don’t believe. But I talked to them a few years ago and I was like, they have a category of “other.” And I’m like, “What’s other? What’s the risk of other? Where’s this money going?” And at that time, they were lending corporate bonds to the bank so the bank could go to the feds and get money. And then the bank paid the life insurance company back. And I’m like, I was hesitant on that because I’m like, what happened in ’08 and ’09? And the insurance company told me, “We saw this coming. So we had already quit lending them those bonds.”

The insurance company, it’s funny when people are like, “Oh, investments make this bigger rate of return” and whatever. If you talk to an insurance company, they will tell you there’s one pool of money in the world. We’re all accessing that same pool of money. Even the insurance companies say this. They’re like, so insurance company A and insurance company B are not investing in different things because there’s only so many things to invest in. So your financial advisors are investing basically in the same mutual funds, the same stocks, the same bonds, right? Because there’s only so many of them to invest in. The banks are investing in the same thing that the life insurance companies are investing in. Nelson didn’t make this shit up. It’s actually what’s happening. And when you start talking to the investment officers at the insurance company, you go, “Oh my God, they’re doing the same things everybody else is doing.” They just plucked out the non-risky things, the guaranteed things, because that’s what’s going to sustain their business for hundreds of years.

Yes. It’s like, wouldn’t you want to put your money with someone that had the historical backing of being able to pay out death benefit claims for that many years?

Right.

Yeah, I’ll take the safe bet.

It’s crazy. That is crazy. He says, extra dollars will go into the policy to increase the capital that can be lent to other parties. If the policyholder objects that “it’s my own money and I’m not going to pay interest at all, or maybe I’m only going to pay 2.9% as seen on the television commercials,” then the agent must remind him of the grocery store at the beginning of the book and explain to him one more time. If he still doesn’t understand, then the agent needs to have him revisit the story of the failure of the First National Bank of Midland. If he still doesn’t understand, the agent needs to resign from working with him because he is not teachable and/or is a thief. Neither of these characteristics is a desirable business associate.

Well, why would he call them a business associate? Because he is in business with the life insurance company. And we’re in business with the life insurance company.

Right. Because it’s a mutual company. So if you want to be a crappy banker and steal from my company, no thanks, I’m out. If you want me to explain it to you once, I will. Twice? Yep. Three times? I am literally out. Because it’s all right here.

It is.

It’s all in this book. And if you choose not to be open-minded, not see it, and not understand it, you’re choosing that. I used to say, “Nelson, thanks for sharing.” Or, you know, I’d thank him for stuff. And he’d be like, “Mary Jo, I didn’t do anything. The teacher appears when the student is ready.” He’s like, “You wanted to learn it. I was just here to teach it.” He’s like, “I didn’t do anything special. You had to be ready.”

I mean, sometimes I don’t even get to the third.

Kudos, Nelson. Furthermore, I’m not describing one life insurance policy. This is to be a system of policies. Have you noticed that when a grocery store becomes successful in one location, then it tends to establish another store? Have you noticed when a bank is successful, they also have branch offices?

Expand operation.

Yes. It will take the average person at least 20 to 25 years to build a banking system through life insurance to accommodate all of his own needs for finance, his autos, house, etc. But once the system is established, it can be passed on to the future generations as long as they can be taught how the system works and suppress their baser instincts to go out of the back door with the grocery store. So again, he also, right above that, he said all they have to do is capitalize the bank to make it a safe place for customers to deposit their money. And so all of these things, like, he has said them over and over and over. His book could probably be half the size, but then repetition is apparently where we’re going to learn. But 20 to 25 years. Anything to add? That was a long chapter.

I love, I just love this chapter.

We just love every chapter.

We do.

Well, I just love this book. And every time I read it, I just get even more.

You know what’s so cool about infinite banking is just, like, the more you’re in it, the more you love it. The more excited you get about it.

The more you read it, the more you’re in it to be excited.

Yeah. Once you understand the problem, the solution is exciting.

Yes. Right. But if you’re not going to constantly be looking at it to learn it, to be in it, and not even constantly, but regularly, then you’ve literally built the bank. You lock the doors and said, “I’m not accepting any customers. So I stuck all this money in. Thanks, but no thanks.” It’s going to fall apart.

Yeah. Or it’ll just be a really good savings account.

But it’s not going to do what Nelson’s talking…

Exactly.

All right, guys. Well, that’s all we got on that one. Let us know if you need us. Grab your books, email, comments, questions, concerns, and we’ll be happy to answer. You have a fantastic rest of your day.