How policy loans work - this is really the key to understanding the whole idea of the infinite
banking concept and really making it transparent because there's a lot of misconceptions or ideas
out there that we borrow hidden interest back to ourself or that we can always borrow
the death benefit. What we want to know is when we borrow from policy what's the impact to watch to the
policyholder and also to the insurance company we understand how they're making money it'll help us
understand the concept further as well so we've got a pretty simple example up here 45 year old
male this is one of the major mutual companies we're going to look at it we're gonna look at
comparisons there's the same policy the first one's a high cash value life insurance policy
account where an individual pays in $50,000 a year for 10 years compared to the exact same
policy of the same individual paying in the same round of money for the same period of time the
difference and one example we're gonna see what she pays in we've got a breaking point year for
this is an on MEC by the way these are there for 10 years nothing in there thereafter but to sit
and grow I've got the dividend column as well compared to the example where we decide to pull
loads out so when it comes to loans we can take out loans from a life insurance account anytime
we want no penalties and nothing like that so we're gonna take out a loan year 5 in this
example of $200,000 so we pulled out $200,000 the first thing that I want to highlight here
is when you look at the death benefit at this point in time this is a year 51.4
$2,428,000 compare that to the same point in time where we just
let the money sit and grow 1.6 million it's an exact $200,000 reduction so we've got your loan
balance there. Now in this example we decided to repay it like clockwork right 50,000 a year the
loan interest on this example was that 5% right so if we actually tally up those repayments
here's the important thing to know is we took out $200,000 we said
the reduction in cash value view that really as your line of credit that's what that is we paid
back 228 dollars call it two twenty nine we want to round up so
that extra $29,000 that was interest that was paid to the insurance company it
did not go back to our self so if we were to stop there this concept the whole idea of using a life
insurance policy as a financing vehicle what makes zero sense whatsoever. Where it makes sense is if
we look at year ten were to pay back in this example hypothetically he came
back aggressively but there's gonna be something consistent here when it's repaid in year ten our
cash values $570k and our death benefits 1.9 million the example where we just
let it sit and grow our cash values $574k our death benefit is 1.9 million your
values are 100% restored through exactly what they would have been if we had never pulled it out in
the first place and that's going to be the case if we pay it back like clockwork very aggressively or
if it took us 70 years it doesn't matter the main takeaway is anytime we take out a loan from a
life insurance policy and we pay it back whether it takes us I hear 10 years or 30 years whenever
when the loans repaid you'll see your cash value and death benefit fully restored to exactly what
it would have been if you had never pulled out a loan in the first place how that works is they
hold our death benefit as collateral and while they do that they pay this even ends out as if
we never pulled it out in the first place there are some differences with non direct and direct
recognition if you're sticking with the major mutual companies the quality carriers doesn't
make a whole lot of difference it's usually used for marketing that's where the
back and forth is but you will see a consistency regardless of the type of company dividends are
paid on everything whether it's on cash or if we borrowed some or all of it out of this house