The Third Step to Creating Your Own Personal Bank

In the last two (2) postings we discussed about the first and second steps in creating your own personal bank:  get a whole-life dividend paying life insurance coverage from a mutual life insurance company and capitalize this coverage (which is your “bank”) for the shortest time possible, i.e., five (5) years.

The third step is a no-brainer:  set up several “bank branches.”

Remember, we are using the whole-life dividend paying life insurance coverage primarily not for its death benefits but for its guaranteed cash values and dividends for use as funds for financing big-ticket items such as car purchases, grand vacations, business expansion, or loan and mortgage repayments.

By setting up several “personal bank” branches, we will then optimize our sources of financing funds.  Just take a look at how many branches your neighborhood bank has.

On my next posting I will illustrate how infinite banking concept can be use to purchase several cars over a lifetime.

The Second Step to Creating Your Own Personal Bank

Mutual Life Insurance vs. Stock Life Insurance

The previous posting tackled the first step to creating your own personal bank:  get a whole life dividend paying life insurance.

In order to maximize and harness the full power of your personal bank, it is recommended that you have to get your whole life dividend paying life insurance from a mutual life insurance company as opposed to one from a stock life insurance company.

In a stock life insurance company,  whatever profits are there are first allocated to satisfy the stockholders of the company, before the policyholders get their shares in terms of dividends, if there are any left. 

In a mutual life insurance company, there are NO STOCKHOLDERS.  The policyholders own the company! In return, whatever profits are there are fully allocated to satisfy the policyholders.

Capitalize Your Bank

The second step to creating your own personal bank is to fully capitalize your bank.

To fully capitalize your bank, get a whole life dividend paying life insurance and fund it with the most premium or capital you can afford for the shortest time possible.

Most people get their life insurance with emphases on maximizing the death benefit with the least premium for the longest paying period available.  This route we have to reverse for purposes of infinite banking:  get the least death benefit,  with the most premium paid and the shortest paying period available.

We are doing this because we are getting the life insurance primarily not for protection but for financing and banking purposes.  However, if we do it the infinite banking way, the protection aspect will take care of itself.

On my next posting, I will discuss the need to put up several “branches” of your personal infinite bank.

The First Step in Building Your Own Personal Bank

The first step in creating and building your own personal infinite bank is to get yourself a dividend-paying whole life insurance.

What is a dividend-paying whole life insurance?

There are several variants of  life insurance coverage in the market today.  One is the term life insurance coverage.  This is temporary life insurance whose coverage is up to one year, or five years, or ten years.  This type of insurance is akin to renting a house.  You pay a monthly rent but you will have no equity, or ownership, on the house.  Term insurance does not have cash values.

Another type of life insurance is the endowment type.  This type will give you cover up to a certain number of years, i.e., 15 years or 20 years, or up to a certain attained age, i.e., age 50 or age 65.  When the number of years or age is attained, the coverage matures or endows, you will get the benefits stated in the insurance contract, but you will no longer have an insurance cover.

A dividend-paying whole life insurance, on the other hand,  is a life insurance that will give you a coverage up to age 100.  This type also gives a yearly dividend, although dividends are  not guaranteed.

Where to get a dividend-paying whole life insurance.

There are several life insurance companies operating in the Philippines today.  But for purposes of infinite banking,  the recommendation is for you to get your dividend-paying whole life insurance from  mutual life insurance companies, as oppose to getting your insurance from  stock life insurance companies.  There is a reason for this.  And, that will be the topic for my next posting.

Have a blessed year ahead!