89: The Secret to Why IBC Works

089 The Secret to Why IBC Works

John Perrings: [00:00:00] Episode 89, The Secret to Why IBC Works. Hello everyone. Welcome to the Strategic Whole Life Podcast, formerly The Fifth Edition. And in this episode, we've talked a lot about how IBC requires long range thinking. Well, The other thing we need to consider, , is the fact that whole life insurance from a dividend paying mutual company, offers capabilities that you really can't find anywhere else. Insurance, all types of insurance, use the law of large numbers to create certain outcomes. It's really almost the opposite of gambling. With gambling, you pay a certain amount to create a less certain outcome.

With insurance, you pay a certain amount to create a more certain outcome. Okay, so the way insurers create more certainty is through the law of large numbers, which gets into the [00:01:00] actuarial science that kind of backs everything. So the reason I'm pointing this out, is to make the point that it's the mutual insurance company with their thousands and thousands of policy owners who, by the way, are part owners of the mutual insurance company,

it's those people that make all of this work . It's all of the policy owners, working together in a corporate body,, which is the mutual insurance company that gives whole life insurance, its superpowers. A lot of lip service is paid towards, doing business or buying policies with a mutual insurance company, if you're going to practice the Infinite Banking Concept.

But I don't think it's really talked about enough why we do that . And it's really that piece that makes the whole thing work. And so the reason I'm bringing this up is I want to try to steer people away from thinking about their whole life insurance policies only from through the [00:02:00] filter of what it will do for them and start thinking about how they're operating and the benefits of a whole life insurance policy through the lens of how it can benefit the mutual insurance company.

Because if it benefits the mutual insurance company, it benefits you .

Where else can you get very respectable growth that is, by the way, Guaranteed, let's just hammer that point home. Guaranteed growth that's tax deferred. You can get to it tax free. It's leverageable through the use of the policy loan provision and that underlying collateral is again, guaranteed by the insurance company itself .

You simply can't get this anywhere else. You can't get this without setting up some type of massive corporate structure that's designed from the ground up to funnel all of its profits to its members. That just doesn't exist yet. The reason I say yet is that you should stay tuned and keep listening to this podcast for some big news coming out in the near future.

 Okay, back to why this [00:03:00] matters. I see just really too many people looking at whole life insurance for what it can do for them as individuals. They're looking at all the variables through the lens of what it can do for them and. Now, I'm not admonishing that.

John Perrings: Obviously, we want to do things that are good for us. We don't want to just, give away our agency and our productivity to something that's not going to give us anything back. Where it can go bad though is when they start trying to get a free lunch at the expense of all the other owners of the mutual company.

And again, I'm not saying they're doing that on purpose, but the typical mindset um, is kind of that investor mindset. And like, what is this going to do for me? What we have to understand is if we do things to protect the mutual, the mutual can then in turn do good things for us .

What are some examples though of looking for that free lunch? One of them is looking for the lowest [00:04:00] loan interest rate as it pertains to the individual, not the insurance company the second one, non direct recognition loans, Where everyone gets the same dividend regardless of whether people who have used policy loans have taken money out of the general fund to use for their own purposes.

They get the same dividend as everyone else who hasn't done that. And the number three, looking at. Policies like a financial hack, right? Where they start paying. Sometimes unsustainably high premiums for the purpose of immediately borrowing all the money that they can to make it seem like they're getting kind of free insurance.

This is just the default mindset when looking at personal finance . And so that, that trickles into this whole life conversation and IBC, what can a whole life insurance and IBC do for me? Again, of course, we want it to do something for you, but the real power comes from working together in the mutual insurance company[00:05:00] .

 It's the mutual company. Which are made up of thousands of policy owners working together for mutual benefit . It's that mutual benefit that makes Whole Life Insurance so special. Again. I'm not saying we should ignore our own financial world. But the mindset of how we use whole life insurance should be aimed more at what's best for the mutual insurance company. If all of the policy owners start doing only what's best for them, it weakens the mutual company.

John Perrings: Which weakens our own policies with that mutual company. Remember, all profits of a mutual company go back to the policy owners in the form of a dividend . So why would we not want to do what's best for the mutual company and make it as profitable and efficient as possible . The more profitable the mutual company is, the higher the dividend . Profit includes costs, by the way, which costs also include the cost of money. [00:06:00] When we're looking at things like loan interest rates, they should be what makes sense for the mutual company, not the individual .

When we're looking at dividends, dividends should be recognized in a way that's the most fair for all the policy owners and respects the lost opportunity cost of that money that's leaving the mutual company . Policies should be recognized for the incredible financial asset that they are. Not a financial hack . Not a hack that we should bleed dry at the earliest possible time . By far, the people who bleed dry their policies of cash value using policy loans have a much higher lapse rate. It's probably, it might be the number one cause of policy lapses and the loss of those premiums negatively affects the mutual company .

By the way, this is why they'll ask you on an insurance application, if you've ever. Let a policy lapse or sold it to another party. So IBC is not a hack. It's a [00:07:00] process and the process, like most processes, when you first get started, it takes work and it takes time.

And also like other processes, IBC, once it's been running for a while, becomes more and more efficient as you go along. The more mature a policy gets, the more efficient it gets. Eventually this process starts to run so efficiently that it becomes something that you could have only dreamed about when you first started this process.

It's something so powerful that it actually looks like a hack to someone who hasn't started yet. And this is why the probably number. One or number two thing I always hear when people first start this is they wish they had started this 10 years ago, 20 years ago, 30 years ago, whatever it might be.

So as we wrap up this episode, just to summarize the points, we have to respect The mutuality of what we're doing together with all of our life insurance policies, the law of large numbers, [00:08:00] the actuarial science that goes behind this. And we have to respect our individual policies themselves for what they are, a piece of a corporate body that's allowing us.

To get more than you can get anywhere else. So whether or not you've already started IBC or whether you're just interested in it and are doing your research, I would say reflect on your system right now. How is your system being protected by anything? Most people, they're just out there in the wild. They have nothing that's really, That really has their back, so to speak, financially, everything's being risked.

People get laid off from their jobs. They lose money in the market. Their stock options don't pay out. All of these things happen. The mutual company is designed to protect us from all of that stuff, but we have to, again, respect it for what it is.

So think about what you have in your life and where something like this could be of benefit to you to have that as long as [00:09:00] you take care of it, it'll take care of you and your family. Which will create generations to come of financial success.

Wrapping up this episode here. If any of this was resonating with you, and you'd like to learn more about how this could apply in your life specifically, head over to StrategicWholeLife.Com. You can book a free 30 minute consultation with us right there. And we can talk about you specifically. And if you're. The type of person like I was, that just wants to keep learning and learn everything they can before talking to anyone. We have an online course just for you. You can go to StrategicWholeLife.Com and right there in the top banner is a link to our course IBC Mastery. So I hope this was helpful and we're looking forward to seeing you on the next one.