E48: When Can I Stop Paying Premiums

Nate: In this episode, we will discuss when it makes sense to stop paying premiums towards your whole life policy when you’re using it as a banking tool, and why you’ll probably have to change your perspective on the word “premium” if you want to be successful at IBC in the first place. She’s Holly, and she helps people find financial freedom.

Holly: He’s Nate. He makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: We get this question asked of us quite a bit. For those of you who are new to the podcast, you might want to look back at some of the previous episodes to learn about what this whole infinite banking concept is and how we teach people to use whole life insurance differently than most people could ever have imagined it could be used for. As a banking tool, financing new cars, investments, weddings, you name it. Using policy money to do that. One of the questions we get asked all the time: “When can I stop paying premium?” Where does that question even come from typically?

Holly: When we are raised and we grow up, when do we stop paying the car payment? When do we stop paying our mortgage? When do we stop paying health insurance? When can I go on Medicaid? We’re ingrained in our society with this ability to want to have to stop giving money out, and the belief, really, that we’re taught is that if we are giving and we’re viewing this premium as a payment, then it’s money that’s leaving or hindering our lifestyle, or the ability to really make money with it. I often ask individuals when they ask me, “When can I stop paying premiums?”, I say, “Well if we’re really using it for banking, would a bank ever want you to stop making deposits into your bank account?” The answer is no. They couldn’t make money if people stopped making deposits, and the same is very true of their policy. If you stop making premium payments, then you basically are stopping depositing into your bank and so you have no money available.

Nate: Yeah, the only way to deposit money into your bank is really a premium. We can talk about repaying policy loans and things [as kind of 00:02:20], but the best way is paying the premium. You’re absolutely right. As an owner of a bank, do you ever want people to stop making deposits? That would be crazy. We don’t see ourselves typically as the owner of the bank now. We still see it “everyone is out to get us.” Like “the insurance company is out to get us with this premium, they want to bleed us dry with a premium” instead of being like “no, I’m the owner of this company and if I pay this premium, look at how much money I’m going to get back.” We’ll get into that, but I totally agree with you, Holly, whenever you said that. It’s like, we live our whole lives trying to get our cars paid off. We can’t wait until the day we get our mortgage paid off, our credit cards paid off. We have this “paid off” mentality, and we kind of lump our banking policies in there where it’s like, “When am I going to get my policy paid off?”

We still don’t see it as a bank, I feel like. In other words, we [want that to 00:03:07] be happy, big numbers in the bank account. Whenever I write a check to my policy, my bank account has less. The reason that it feels worse that way is because we need to make the hurdle, the jump to actually see the policy as the bank account. If you can’t get there, then it’s going to get hard to get to the point where the premiums don’t seem like a burden, I guess I would say.

Holly: You really have to start thinking like you are a bank owner. This is your bank. Would you ever want anybody that is a client of yours or a customer ever to start depositing? The hard part is, you are the owner and the customer. We have the mentality like Nate said, that life insurance companies are out to get us, but when you are a shareholder in that, the life insurance company isn’t out to get you because the benefit of the premiums being paid benefits you and the other shareholders. They kind of are managing the money, if you want to say, and the policies, but really in reality you reap the benefit of continuing to pay those premiums. I think the mentality just that we don’t think of ourselves as a bank, and we’re going to be making less when we get older, so, “Oh no, I’m making less so I can’t afford as much” instead of having the mentality of, “Well what happens actually when I put that premium into my policy?”

Nate: What we don’t want to get across here is that there’s a time when the policy can pay for itself and you can stop paying premiums, but the reason I don’t like to stress that ever with someone is because, why would I show you how you could make less money? Why is it even an option? People come to me and see me as an advisor, not just as an order taker, and you really want my advice on how to be the best banker and how to make the most money, I can’t tell you it’s a wise decision to stop paying premiums after your five, six, or seven because you’ll be missing out on the growth that I can show you how to do. It’s very easy. As Holly said, many times we lump it into this “payment” mentality. You have car insurance premiums, you have term insurance premiums, disability. We have all these different premiums, and Holly, whenever we pay those premiums, do we have more money or less money after we’ve made the payment?

Holly: We have less money, and it doesn’t do anything for us.

Nate: Right, unless we make a claim, and we don’t ever want to make a claim, but-

Holly: Because then we pay more money-

Nate: And deductibles and stuff, but you’re right: if I make a $500 payment towards car insurance, home insurance, and different things, we all know I have less money the next day. I’m poorer now. I’ve got less money after I’ve made this premium payment. It’s hard to get your brain to think outside of that because that’s what we’ve been so used to. We lump the policy premium with all the other payments in our budget. We look out at like age 70 and we look at when we’re retiring, and Nate’s saying, “Pay your premiums because it’ll help you” and you’re thinking, “Well if my premium’s $10,000, at age 70, I don’t work anymore. I need money. You’re essentially me to live off $10K less than I would have otherwise. How can I afford to keep paying this?” The issue is that it’s lumped in to the expenses, not into the assets.

Holly: And the mentality that you’re worse off.

Nate: Right.

Holly: You’re automatically believing what you’re been told. “I’m worse off-“

Nate: “After paying this.”

Holly: “Or giving this money away” because you haven’t differentiated that it actually is a different type of premium payment. What Nate and I are trying to tell you is that we’re trying to make your money as maximum efficient as possible. We want that money to grow exponentially for you. If you knew you could put $10,000 in and get more than $10,000 out, not only did you not live on $10,000 less, you actually now have more in your bank account to maintain your lifestyle.

Nate: Right, so if you pay $10K and now the policy cash value increases by 20, and we take the 20 out of the policy and put it right back in that same bank account, you now have $20,000 instead of $10,000. Did you make a $10,000 payment? Yeah, but did they send you $20K because of that? Yes. How many times do you want to do that? If the answer isn’t “as many times as possible,” then you don’t need our help. That’s what we’re trying to help you do, but that’s absolutely right. In other words, you need to see what happens when the money goes in. Does the insurance company confiscate it or is something else happening? Of course with IBC, with infinite banking and doing policies this way, we make a premium payment, we get cash in return. The longer the policy’s enforced, the more that will be due to compounding and different things will have a lot more.

We do need to change the way we see premiums from adding into the payment side of the budget to the asset side of the budget and see what happens when we actually pay the premiums. It can really free people up, I think. If you think of it as a liability and as “a payment that I just want to get paid off at some point,” you’re going to be very limited on how far you can take IBC and how much money you can make.

Holly: Most of us call it a “premium payment,” and because we call it a “premium payment” it automatically goes into our mind as a payment. It’s a mental block. It’s a premium payment. I call mine “premium deposits.” Why? Because I want to view it as a deposit. I don’t look at it as, “Oh, a bill came in the mail.”

Nate: How many other people are excited to pay premiums? I must be mentally out of control or something to look forward to that premium bill. I can tell you guys, I don’t really look forward to my car insurance premium-

Holly: Oh, I hate it.

Nate: Bill or my home insurance premium. I’m not nearly as cool with those, but whenever I get a premium notice for one of my policies, I’m looking forward to moving money into my bank as much as I can at any point. I look forward to the premium. I tell you this: when I’m 75, I have a feeling I’m going to look forward to paying premiums then, too. I’ve seen what my policies are going to do and how much they’re growing by age 75, and I’m just trying to get more of them. The more premiums I have, the more money I’m going to get back tax-free, guaranteed from the insurance company during that time frame. I want as much back. If you knew you could get all the money back you put in plus some with no risk, how much [inaudible 00:09:25] do you really want to be doing?

Holly: Are you tired of being stressed about money? The Dollars and Nonsense podcast is sponsored by Living Wealth. Visit livingwealth.com/freedom to get your free “Smart Money” eBook and sign up for our personal wealth presentation today. Living Wealth is a family-owned and operated business which works with individuals, families, and even businesses to slay the money stress dragon. Our clients receive individual coaching regarding wealth creation and how to create a retirement income. You’ll be enabled to have cash today and in the future. Since 1972, Living Wealth has been committed to educating smart people on basic money principles to assist them in becoming debt-free and finally find financial freedom. Let us help set you free. Remember to visit livingwealth.com/freedom to receive your free eBook and even sign up for an individual wealth presentation today.

I think, too, the fact is that you’re actually adding money to your lifestyle to live, Nate, but also it’s money that’s not taxable because it is a loan. When we get older, it doesn’t affect social security, it doesn’t affect our income tax because it’s actually a loan from the insurance company. It’s not income that you made that you’re having to pay that could affect other areas of your life. Now I don’t think social security’s going to be around when I get older, but if you’re one of those individuals and that is something you think about, the fact that a policy actually helps you and doesn’t hurt you in regards to the money, I tell people all the time, “If you have zero dollars in your pocket and you were able to come up with $10,000 to pay the premium at 65, 70, and then they gave you $20,000 back, did you just make money?”

Nate: Absolutely, by moving it.

Holly: By moving it. All you did is move it, I say, from one pocket to the next and then back. Really, all you did is change the way the money was going; instead of away from you, it comes back to you and you just made money, of which you don’t have to pay taxes on because it’s a loan. All in all, you got ahead even if you had zero income-

Nate: Right.

Holly: Because you can find that money. Trust me, if you know you’re going to get it all back and more money, you can find it.

Nate: Even if you got to pull it from a different policy that you own, because hopefully at age 70 you’ve got a couple of them. Move money from one to the next and make money. That’s always fun, too. If you’re listening to this and you’re and IBC-er, if you have questions or concerns and you don’t look forward to the day that the premium notice comes due, then you probably need to change something in your mentality or need a little bit of education, or have someone run through the numbers because I look at these things and look forward to it because I’m crazy. I drink way too much Kool-Aid, but I look forward to the premium. We feel like you guys can get there too. To me, it’s absolutely not a liability in my mind because I’ve just been around it for so long. Our goal is to help you guys see that whenever you buy a policy, you’re not buying into a liability; you’re buying an asset, and all of the money that’s going in there is working for you.

The flip side, and we wanted to mention this as well on policy loans, so we’ve talked about the premiums but many of us also mis-characterize policy loans where we lump it into other debts that we have. As Holly and I were talking about, policy loans are a totally different animal in how they really work. How should we be thinking about the policy loans that we take?

Holly: Well I like to tell individuals that often they view, just like Nate said, the loan as a debt, and a policy loan is a debt. They categorize it just as if it’s a loan to a bank or a car dealership, or whoever it is that they owe money to. They view it as a liability. “This is a loan that’s a liability, I’ve got to pay it off,” and yet I’ve just asked them, “Does a bank view a loan as a liability or an asset?” To a bank, a loan is an asset on their books. That’s a good thing. A bank never wants to stop making loans; they want you to keep making deposits and they want to keep making loans. On the same hand, we should be viewing our loans from our life insurance policies as an asset, not a liability, but we still have that same mentality. It’s “oh, just going right into the same column as all the other debt or the liabilities,” and we never ever tend to view it as an asset. Like Nate, I guess it’s the Kool-Aid; I’ve drank too much of it. I don’t mind taking a policy loan.

I want to know when I can take my policy loan and be able to use it for something. The reason for that is just because I want to keep my money in motion, but I know it’s an asset. As my loans come out, I’m using my good dollars today. I’m keeping them in motion. I just feel like we have to change that mentality.

Nate: It’s also different than any other loan you have, because the same thing could be said about policy loans as we just talked about policy premiums. We’ve talked about car insurance, home insurance, all these different premiums that when you pay them, you don’t have any more money. With a banking policy, you pay the premium and you instantly have more money to utilize. We’ve had car loans before, we’ve had mortgages before, we’ve had credit card debt, student loans. All of us know what it’s like to pay on those, and we don’t like paying on those because as soon as we pay on those, we’re worse off than we were before. We make the car payment, $500, money’s gone. We don’t get it back. It’s in the bank’s hands. Same thing for the student debt, credit card, mortgage. Money’s gone. For those of you who are doing IBC, I dare you guys to do this: have a loan out, write a check, sent it to the insurance company as a loan repayment. Before you send the check, ask them how much cash value you have available, and then after the check clears, call them back and ask them how much is available.

You’ll see that all the money that you just sent them is available to you to borrow right back out again. When you’re paying your policy back and you write the check, the money’s not gone. That’s why it’s so beautiful; whenever you borrow money to buy a car from your policy and you pay you back $500 a month, it is completely different than when you borrow $25K from a bank and pay them back $500 a month. When you’re paying you back, guess what? At the end of 60 months or however long the time frame you pay you back, you’ve got all the money back plus the interest in your account as opposed to when you used to borrow money from the bank and make payments to them. They had all the money. You had nothing but a car. It’s totally different. Policy loans are assets to you, and you don’t have to stress out about them 99% of the time. Now I’m hoping you’re wise with money; there can be times when you’re just blowing money and you want to be productive, but for the most part, it’s a totally different animal and you don’t have to stress like you probably do about your policy loans.

Holly: Even with loans, like when a client’s taking out a loan, “What’s my interest rate? How long do I have to pay it back?” When you tell them, “Well you can control how long you’re going to pay the loan back.” The interest rate yes, we can tell you the interest rate very easily what the insurance company is charging depending on the insurance company you’re using, but if you want to take two years or you want to take sixty months, whatever it is, it truly is up to you. I had a client: “I missed a loan repayment.” Well that’s okay. We can add it on at the end-

Nate: You put a pink slip on your car.

Holly: I’m like, “Are you going to go repossess your car because you missed the-“

Nate: Did you call the tow truck to get it taken away? No.

Holly: They’re like, “No. We’ve been having it automatically drafted out, but we changed bank accounts so we had stopped it and it just hadn’t been added back in.” The beauty of it was, when she did just what Nate said, she called and made a payment over the phone, and then the next week she said, “Hey, how much do we have to borrow out?” They had all the money that they just paid for a loan repayment to be able to use. She was like, “Oh, this really is not costing us anything,” and her mindset, because the money went in and then it was available to borrow it out. Now they didn’t borrow it out because they didn’t need it for anything, but she was just blown away. “I didn’t get a pink slip, I didn’t get a late notice from the bank. Nobody came and locked my car or towed it away. It’s easy to do.” If it’s a tight month, when the money’s owed to you, you don’t actually have to make that payment.

Nate: The only reason you’re paying is to help you. No one else is knocking on your door. That’s probably my favorite about IBC. When you boil it down to the simplest form, I do not like to be out of control and I don’t like the way the world treats money. I don’t like how so many people are in debt to other people. The borrowers are a slave to the lender; I don’t want to be anyone else’s slave. I don’t like how mutual funds and 401ks and IRAs are governed by other people or I don’t have use of the money. It’s risky, there’s things that go [inaudible 00:18:26]. When I boiled it down, for me it was about “I want to be in control. I want to determine how much money I can pull out, and I want to be able to pull it all out if I want. How can I put it back in? I don’t want to be risking it. I don’t want to have some other money manager handling the money that could lose it all for me.” I just wanted to be in control, and it’s a simple life. It really is, I find it.

It’s the simplest way to live if you understand the tool. If you don’t know what you’ve got, then it can be confusing, but you’re probably overthinking it, to be honest.

Holly: [Well 00:18:58] it’s so simple. I heard a client say, “It really is third-grade math” the other day to me. Because it is so simple that you kind of sometimes do overthink it and are looking for “where’s the-“

Nate: Catch.

Holly: “Catch?” Where’s the loophole? I’m like Nate, too; I really want to know where my money is, but I want to have complete control and access to it. I don’t want somebody telling me what I can and can’t do with it. I even had somebody ask me, “What do you invest in?” I actually said, “I don’t invest. I just like my policies-“

Nate: “I like my policies.”

Holly: “And my lifestyle, so I kind of just use them for everything I’m doing.” I guess I’m investing in me and my family, if I really want to be honest. [I’ll loan to 00:19:41] us and make the loan repayments, and I’m really okay with that. I’m not a risk-taker, real risky. I don’t really want to invest in something and have a fear of “I’m losing the money,” but actually with my policy, it would give me the ability to do that because I really don’t feel like I’d lose anything because it’s still growing. The beauty of it is that total control. You own it. Even when we deposit money in our banks, we don’t own that bank. They can change the terms and conditions whenever they want.

Nate: For you to be successful, you’ve got to see premiums correctly. You can’t be of the mentality that “I want to have my policy paid off. I want to have it paid up. I don’t want to deposit any more money.” It’s impossible to live without money, without cash. The question is, where is it going to be? If it’s in your bank, you want to have as much as you can, but if you don’t see premiums right, if you don’t see policy loans and loan repayments right, then this whole thing is just going to confuse you, irritate you, and trouble you. You’ve got to see the picture as a whole. We can help you do that, but if you’ve been one of those who have seen your premiums as payments and you’ve been seeing loans as a liability and not as an asset, the system isn’t broken. It’s probably just the perspective that you have. It’s missing some elements, and you may not see the whole picture very well. Whoever you’re working with, you probably want to ask them, “Can I see what my policy looks like after I pay premiums? What my policy looks like after a loan?”

It’s pretty easy to figure that out, but if you see it rightly, you see premiums as more of a deposit or as an asset, you see loan repayments as more of a deposit than a liability, this whole thing can make a lot of sense. It could put you truly back into control financially, a lot more so than anything I know of honestly. This gives you the most control of your finances than anything else that I can think of.

Holly: I’m in agreement with Nate; I don’t know anything else that works this way. I hope you really heard our hearts today, that we really want the best for you. We really want to help you, whether it be changing your perspective on that premium and not lumping it into all the other premiums we pay, but actually differentiating it out, and to really understand that a loan is not a liability to you; it’s actually an asset to you. Just changing those two concepts, it brings such freedom, like a weight off your shoulder when you’re able to actually do that. It’s easy to get stuck back into it, but it’s really simple to just move it back over and say, “Okay, this is a different type of premium,” or don’t call it a “premium payment.” Call it a “premium deposit,” and all your other ones are premium payments-

Nate: Right.

Holly: Because you don’t get anything from them.

Nate: Right, exactly.

Holly: You’re out the money.

Nate: Well that’s probably all the time we have for today. This has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free resources and transcripts, please visit livingwealth.com/e48.