Hands down, the biggest stumbling block to spreading the “good news” of Nelson Nash’s Infinite Banking Concept (IBC) is that it relies on acquiring whole life insurance policies. As “everybody knows,” only a fool would take out such a policy—just ask Dave Ramsey! The financial gurus tell us with confidence that an individual does much better to “buy term and invest the difference.” In the present article I’ll point out some of the flaws with this standard objection to whole life (and by implication, IBC).
Whenever a newcomer is introduced to the wonders of dividend-paying whole life insurance, he soon encounters the dangers of overfunding and hence “MEC”-ing a policy. In this article I’ll give a quick primer on what this status means, where it came from, and the ramifications it has for policyholders.
Until 1976, no one in the life insurance industry had ever done an empirical analysis of the policy loan option in an insurance contract. With the life insurance industry being centuries old, the fact that this type of research had never been done before is quite surprising. However, in 1976, two industry insiders, Wilfred A. Kraegel and James F. Reiskytl, dug deep into transactions of the Actuarial Society of America; the records of the American Institute of Actuaries; the general proceedings of the American Life Convention; and other journals, conferences, and court renderings of the 1800s and early 1900s to uncover a host of revealing historical facts about this unique policy feature that brought serious scrutiny to their findings by other members of the actuary societies of that day.
There are many reasons for believing that a dividend-paying whole life insurance policy from a mutual insurance company is one of the last remaining bastions of safety and growth for our savings here in the United States. This unequivocal standard of financial supremacy is highlighted when considering the state of our economy, the constant encroachments of government into our private lives, and the Federal Reserve’s loose monetary policy. Those of us who are privileged to own one or more of these policies are well aware of their multi-dimensional tax-free benefits, the reasonable measure of guarantees which they offer, and the unencumbered access to our money when it is needed. If death should occur in the midst of our efforts to save our money inside of these policies, the entire savings plan immediately self completes and our beneficiaries are endowed with an estate that would otherwise take a lifetime to build.
There is an attitude out there — the dominant, majority attitude, in fact — that says that purchasing a dividend-paying whole life insurance policy with a substantial amount of premium payable to the PUA rider in the first policy year counts as “doing” or “adopting” or “implementing” IBC.
This is wrong.
In Part 1 of this article, I wrote about an in-depth research and discovery I made regarding one of the most familiar, yet at the same time, one of the most mysterious psychological processes utilized today. I am referring specifically to the notion and the power of positive thinking.
After completing last Month’s article in the LMR on the multi-millionaire Spencer Hays, I was moved to undertake an extensive study on the one thing that he had obviously perfected—the art of positive thinking. My research into this fascinating subject has not disappointed me and has yielded some interesting results. In this month’s article I will be able to report to you that this so-called optimistic mood, or positive outlook, if you will, had its origins in the 1820s. Originally called the “new thought movement” and later referred to as “mind cure,” positive thinking is a uniquely American phenomenon. Today it is an entrenched American ideology.
Individuals who own one or several dividend-paying Whole Life insurance policies that are designed in the special way advocated by Nelson Nash’s Infinite Banking Concept (IBC) are often faced with a perplexing question and a decision they must make whenever the need arises to purchase or pay for something.
Earlier this year  we (Robert Murphy and I) asked a high level executive of a life insurance company if his organization had any problems with the increase of policy loans on their balance sheet resulting from the popularity of the Infinite Banking Concept. His answer still resonates inside my head. Although not an exact quote, this is in effect what he said—“Not if I can still fund them out of cash flow. So long as we stay in a high premium environment such as what we have today, I have no problem whatsoever with policy loans.”
Radio talk show host Dave Ramsey has made a national name for himself guiding people out of debt. I occasionally listen to his show (Ramsey and I both live in Nashville), and I applaud much of what he tells his listeners. In particular, Ramsey stresses the importance of having a specific budget and communicating with one’s spouse about money. Furthermore, as a Christian, I also like that Ramsey ends each show by saying that ultimately, the only path to financial peace is to walk with the Prince of Peace.