Ever been indecisive on whether to purchase whole life insurance or term life insurance? That was my plight earlier this summer when I learned about the become your own banker concept with whole life insurance!
Whole Life Insurance & Term Life Insurance
Term life insurance lasts for a specified amount of time delineated within a policy. There is no opportunity to build up cash value or receive dividends ever or even once the policy has expired. When an individual purchases a term life insurance policy, and if they should live beyond that date of expiry, no death benefits will be rendered. If the insured dies within the set term of the life insurance policy, it is customary that the value of the term policy is issued to the said beneficiaries.
Term life insurance is known to be a lot cheaper than whole life insurance.
Whole life insurance policies, on the other hand, provide a death benefit and the cash value associated with the premium.
The cash value does grow over the length of one’s life.
In comparing these two types of insurance the focus is not on the death benefit so much as it is on the ability within a person’s lifetime to use the cash value for medical emergencies, taking a trip, or buying property.
I have been reading a book by the late Nelson Nash entitled, Becoming Your Own Banker: Unlock the Infinite Banking Concept. This book is an easy read and it is appealing to anyone who desires to leave a financial legacy behind for your family, anyone looking to earn more interest than the banks typical 1%, or anyone willing to leverage their assets and diversify.
Nelson Nash’s concept is known as Infinite Banking. In my short, yet intensive, time researching this phenomenon, I have found that individuals can use their cash savings from a whole life policy in the form of a loan for whatever so long as they pay themselves back or not! That is a component on which the bank on yourself idea is predicated upon.
Essentially, you get your cake and eat it too! That’s right, the cash value can be borrowed and makes the notion of whole life insurance mighty attractive to some. Dave Ramsey and his supporters are not among the attracted, however!
This summer, in addition to learning about infinite banking, I discovered the possibility of using credit to move debt and increase one’s cash flow (amount of money left after expenses). This is known as velocity banking. In my research about ways to pay off a new mortgage in 10 years or less, I was informed that the use of a line of credit makes it feasible to pay off large debt in chunks and your existing monthly expenses simultaneously.
My research has not yet uncovered who is credited with this banking idea however, there are thousands of articles and videos teaching about velocity banking in all its glory and dangers. With the opportunity of increasing your cash flow, foolish usage of a line of credit will likely result in a disaster and major credit woes. On the other hand, with careful monitoring and application of strategy, mortgages can be expelled, car notes paid off, rental properties acquired and a financial increase substantiated!
Both infinite banking and velocity banking offer a means of financial independence, but have their drawbacks as well as appeals. I am not a financial advisor, nor have I delved into either of these methodologies. Due diligence is a necessary vehicle which will guide me on my quest for success and wealth.
By: Nikki Felder Murrill