4 years ago I hated life insurance. If you’d have told me to save money into it or treat it as an investment, I would have immediately put you in the category of “snake-oil salesmen” or “gullible financial idiot”. I was a Dave Ramsey Endorsed Local Provider for investing and cash value life insurance was the financial equivalent of the devil.
I remember sitting down with a life insurance agent who was trying to show me something called The Infinite Banking Concept and I wrote him off entirely. Granted, he wasn’t very good at explaining it but after seeing illustration and illustration and chart after chart I stopped him. I very directly explained with conviction that when a person buys cash value life insurance, they have $0 in their cash value for the first 1–3 years, a negative rate of return for 10–20 years, have to pay interest to borrow their own money, and if they die the insurance company keeps it all. I was so convinced I was right that I was even outright rude to him about it.
Later, I had a life insurance agent from the same company try and explain to me the benefits of whole life insurance. At this point in my career I was just annoyed at the topic of it and I told the guy off. I explained to him the same things I explained to the first guy but I went a little further and directly attacked him for ripping off families so he can make a commission at their expense while they lose all of their money. He called me about a week later and told me he quit his job at the life insurance agency because of what I said.
I share all of this with you to show you that I, better than anyone, can play devil’s advocate on the topic of cash value life insurance. You see that was 4+ years ago. Today as I’m writing this article, I own several millions of dollars in whole life insurance death benefit and I have my 6 months of expenses for me personally and my company in my life insurance cash value and I also fund life insurance policies for investing. In the last 12 months alone I’ve put around 6 figures into my life insurance policies.
So how did I go from hating whole life insurance to using it as one of my primary financial tools?
Well it started with the realization that Banks and Wall Street were bad places to put money. You see, I was putting all of my money with Banks and Wall Street at the time. After watching The Big Short, Hidden Secrets of Money, and reading The Creature From Jekyll Island I came to the logical conclusion that I shouldn’t give my money to Banks and Wall Street anymore. I looked to cash instead. But I also kept learning and as I learned I realized cash is debt. It’s backed by nothing and the interest we pay on this debt is known as inflation. So when I own cash, it goes down in value every single year because the government and the banks devalue it by increasing the supply of valueless money.
So I wasn’t going to use Banks, Wall Street, or cash. Where do I keep my money then? I began researching further and further and I kept seeing the same 2 answers show up. Precious Metals and Life Insurance. Now, I was also against precious metals ironically. I’d have told you that gold and silver are just shiny rocks that are based on fear and greed and won’t even have value if the economy crashes. Because Warren Buffett and Dave Ramsey said so.
I came around to gold and silver a lot faster and I went ahead and bought some. But I didn’t want to put all of my money into it because if I needed to buy or invest in something else, I’d have to sell the gold and silver. So I still had a lot of cash sitting in the bank and those were two things I didn’t want to keep using.
About a year passed and I hadn’t found any answers yet and the subject of life insurance came up again. Only this time I saw an illustration that was designed correctly. Where I thought there’d be $0 in cash value the first 1–3 years, I saw that on year 1 80–90% of the contributions were immediately available in cash value. Where I thought there’d be a negative rate of return, I saw a 3–5% rate of return. Where I thought I’d have to pay interest to borrow my own money, I was given the extra data that my cash still keeps growing at a 3–5% rate while I borrow it and it out earns the interest I pay. And on top of all of that, if I died, I’d get more money than I had in cash value rather than “losing it all” like I had seen before. I honestly thought what I was looking at was fake. But it was a real illustration from a real company. So I began to research.
What I found was that life insurance is a very open ended tool. There are different companies that offer it, different types they offer, different modifications of those types, and each one of those modifications is completely customizable. So of all the life insurance out there, what I came up with was a few certain companies, that offer a very specific type, with a very specific modification, and with a very specific customization. It was called High Early Cash Value Dividend Paying Whole Life Insurance.
I began to research just this type of life insurance and I found that Walt Disney, JC Penney, Foster Farms, Pampered Chef, The Rockefellers, The Rothschilds, John McCain, Ray Croc, and other Top 1% wealthy families and individuals in our country used this type of life insurance. I researched further and learned that the largest banks in the United States collectively have over $180 billion in this exact type of life insurance and it is where they actually prefer to keep their most prized reserves.
At this point I wasn’t so stupid or insolent that I was going to ignore all of these indicators. So I decided there must be something to this. I contacted a few of the larger insurance agencies that specialized in this product and began to ask questions, request illustration designs, and look things over myself more closely.
What I saw was that if I setup this exact type of life insurance policy I could contribute $100 (for example) and that $100 would grow at a 3–5% compounding annual growth rate, tax free. While the $100 grew, I could borrow against it at a rate of 75–90% of my $100 at a total interest cost of 1–3%. Again my $100 would still be growing. So in effect I’d make $3–5 on my $100, simultaneously be able to borrow $75 against my $100 at a cost of $0.75-$2.25 and my $100 would still earn $3–5. And then at the same time take the $75 I’d borrowed and go pay off debt or invest in real estate and earn an additional 8–12% return.
Needless to say, my mind was blown. The concept made sense and the illustrations and companies were real. Now I just needed to find a real person who was actually doing this as proof. So I did more research. I came across a gentleman named Nelson Nash. He was a former life insurance agent and wrote a book called Becoming Your Own Banker and it was about how he’d used life insurance, for several decades now, exactly the way I was learning about it. In his book he explained what he’d used it for, how it worked, how he profited, and even included real illustrations and dividend checks he’d received from his policy. This was the last piece of information I needed. I now had proof of a real life person who could prove to me they used this and it worked as described.
Before I jumped in, I revisited my goals with finding a place to put money.
1. It couldn’t be a bank. Life insurance isn’t a bank so that checked off.
2. It can’t be with Wall Street. Life insurance companies aren’t with Wall Street so that checked off.
3. It had to outpace inflation so it wouldn’t go down in value like the dollar. Life insurance checked that off.
4. It needed to be liquid enough that I didn’t have to sell it as I experienced with my gold and silver. Life insurance checked that off too.
In addition to those objectives, there were a few bonus points life insurance had that I wasn’t expecting.
· The money contributed grew income tax free
· I could borrow against my money while it grew, at a lower rate than I was earning, and use that same money in 2 locations at the same time profitably.
· The life insurance provided a death benefit so if I died my wife would get more money than I actually had saved in my cash value
· The life insurance is a “unilateral” contract, meaning that nobody other than me could alter my contract or access my funds. This was big because banks don’t even provide this.
· The life insurance is completely off limits from lawsuits and creditors.
· It has never lost money
· It has made money every single year for over 150 years in a row
I finally understood why banks and the wealthy used these…but the next consideration I had is why hadn’t I ever seen one of these until now? I had been in the financial industry for 4–5 years and I was just now learning about this. Not only that, but I had never even met a life insurance agent who was selling or offering these nor met a client or even acquaintance who knew about it. Why was this 150 year old concept so unknown?
So I went back into research mode. The first thing I came up with, which was easy to spot, is that when a life insurance policy is designed in this way the agent makes 3x less money in commission and the insurance company makes even less. A client who buys a High Early Cash Value policy from an agent at a $10,000 annual contribution may generate $1500-$2000 in commissions for the agent. That’s it. A client who buys a normal life insurance policy from an agent not designed High Early Cash Value with the same $10,000 would generate $7,500-$10,000 or in some cases even more in commissions. So which one do you think an agent is going to sell? Which one do you think his manager is going to teach him to sell? If the company pays $7,500 in commission for one policy and only $2,000 for another, which one do you think generates more money for the company? I’d found my answer.
Next, I looked at the structure of the industry and I realized these insurance companies don’t really advertise this service. It’s reserved for banks, the wealthy, and fortune 500 corporations, which is a very tight knit and quiet group. They don’t really want everyone in the world knowing about it. It’s kind of like finding a good fishing spot nobody else knows about. If it’s that good, you might share it with 1 or 2 of your closest buddies, but other than that you don’t really want anyone else knowing it exists.
This also made sense to me and I began the processing or buying my own policy and learning more about it so I could begin to help offer this to my clients.
Years later and we have helped hundreds of clients get a Life Insurance policy like this. We now called it The Sacred Account because it is money that is set aside that is Sacred. We don’t touch it for anything other than paying off debt or investing. Banks call it Tier 1 Capital and they treat it as Sacred as well.
I’ve paid off debt with my life insurance, invested, bought cars, paid for personal development, expanded my company, and used it for a number of other things and out of all of my assets it is still my favorite one.
I wrote this article to provide insight on how I discovered this cool financial tool, the research I performed, my personal conclusions, and how I personally use my life insurance.
If you have life insurance already and don’t know if it’s designed right, you can reach out to me and ask questions. I’m happy to help! If you don’t have a policy at all and now, you’re interested in getting one, you can reach out to me as well and I’ll help you determine if this is the right fit for you.
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To Purpose, Wealth & Freedom,
Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Fox, Chicago Weekly News, and other publications with dozens of features on popular podcasts and has earned endorsements and affiliations with names like Grant Cardone and Dave Ramsey. Jerry’s mission in life is to help create millions of financially educated and wealthy families navigating their economic futures with certainty and building more prosperous communities around them. Learn more at www.WealthDynamX.com