Insurance can be confusing because there are so many different types and options available but it doesn’t have to be. A properly designed insurance policy can be the foundation of your personal financial fortress.
The benefits can range from a death benefit, tax-free growth, and even your own personal “bank”. Financial Fortress Builders will walk you through the basics and help you design your own private family “bank”.
What Are The Different Types Of Insurance?
There are two main types of life insurance:
Term Life Insurance: Term is life insurance that pays a benefit in the event of the death of the insured during a specified term. Once the term expires, the policyholder can either renew for another term, convert to permanent coverage, or allow the policy to terminate. Term life policies have no value other than the guaranteed death benefit.
Permanent Life Insurance: Permanent insurance provides life-long protection but also provides the ability to accumulate a cash value on a tax-deferred basis. There are different types of permanent life insurance such as: Whole life, universal, variable, and variable universal.
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What Type of Insurance Policy Is Used For Personal Banking?
Whole life is the most well-known and simplest form of permanent life insurance. This is the most common type of insurance used for personal banking and is recommended by Nelson Nash in the Infinite Banking Concept®.
Whole life insurance is a type of permanent life insurance that provides coverage for the life of the insured and also contains a savings component where cash value may accumulate. The cash value grows slowly and is tax-deferred.
Common Whole Life Insurance Benefits
The most popular method for starting a private family bank is purchasing a dividend-paying whole life insurance policy.
You can turn your policy into your personal “bank” by borrowing money against the cash value. You can also surrender the policy for cash but this is generally not recommended for most individuals.
If you don’t repay policy loans with interest, you’ll reduce your death benefit, and if you surrender the policy, you’ll no longer have coverage.
You can take the dividends in cash, leave them on deposit to earn interest or use them to decrease your premium, repay policy loans or buy additional coverage. Dividends are not guaranteed.