E235: Why People Think Whole Life Insurance Is a Scam

In this episode, Nate Scott dives into the whole life insurance debate by presenting five reasons why people believe infinite banking is a scam, and five opposite reasons why people like whole life insurance. His goal is to bridge the gap between those who support and those who criticize whole life insurance. Nate acknowledges the valid concerns of skeptics while also highlighting the benefits that attract many to the infinite banking concept. By offering a nuanced discussion, Nate hopes to encourage listeners to consider different viewpoints when making financial decisions. 

Key Takeaways

  • Criticisms of Infinite Banking: its expense, the belief that agents’ are only in for commissions, lower rate of return, the idea that you’re “borrowing from yourself”, and the perception of the insurance company taking the cash value upon death.
  • Reasons for Choosing Whole Life Insurance: its long-term growth potential, contractual access to money, built-in estate and legacy planning, the ability to fund other investments, and the potential for safe, tax-free passive income.
  • Bridging the Gap: Understanding both sides of the debate can help bridge the gap and foster understanding between proponents and critics of whole life insurance.

Episode Resources:

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Nate Scott [00:00]:

Whole life insurance is one of the most polarizing financial products in the world. Why is there such a wide gulf between the people who believe whole life insurance is always a scam compared to the people, like many of our clients, who love their whole life policies? 

In this episode, I will dive into the five main reasons that people use to decide against using whole life insurance and compare that to the five main reasons that people decide to add whole life to their financial plan. I’m Nate. I make sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered. 

Nate Scott [00:41]:

All right, everybody, welcome back to the show. It’s so fun to have you here again. I’m going to talk about a fun topic, whole life insurance. And if you’ve been here for a long time, you know, that’s what we talk about quite often because we practice this thing called infinite banking, which uses whole life insurance in a unique way that the world really, at large doesn’t understand completely. 

But with this being said, anytime you get involved in something like whole life insurance, there is so much polarization occurring here. There’s so many people who love their whole life policies. I would be one of those. I know I’m an agent. I know that I make money from this.

Nate Scott [01:17]:

I know I’ve drunk the Kool-Aid. People would say I’m biased. I’m just merely saying I love whole life insurance policies for what they are. For the purpose that they’re fitting in my life. But then you go, and if you’re like trying to figure this whole thing out, you’re looking for infinite banking, you’re looking for whole life insurance and you’re trying to, you’re seeing that there’s this big gulf between the people, maybe like Dave Ramsey and people in that camp, maybe in that side of the camp who would be like, whole life insurance is literally the worst thing in the world. 

I think he calls it the payday loans of the middle class. Type of the payday lender of the middle class is like whole life insurance compared to these, to other people who own huge policies, pay big premiums and love every second of it. And there, there has to be some sort of, I mean, there has to be a reason for this.

Nate Scott [02:00]:

There has to be a reason. And essentially what I guess my purpose in this episode, if you’re listening to this, is maybe to bridge the Gulf. Like, if you’re listening to this and you’re one of those people who historically said whole life insurance is horrible and ran away from it, it’s a total scam. I think you can be right at a lot of your accusations against it. But I would, I would ask that maybe we bridge the gap a little bit to maybe help you see that there are actual real reasons that people do want to be involved in it. 

And so what I’m going to try to present here is like, the five main reasons that people would steer clear from whole life, and they call it a scam and what they would claim, if you, like, read articles about, like, why to avoid whole life. But then I also want to do, like, here’s the five reasons that people do decide to do it and so that we can kind of bridge the gap and we can both be right kind of at the same time. Like, it could be a bad idea for some people while being a good idea for other people.

Nate Scott [03:05]:

Like, that’s just the way things work with finances. And there’s very rarely just a total, like a thing that never makes sense for anybody in any scenario like that. I mean, that would be a unique thing. That would be a horrible thing, and it’ll probably get booted out of the market. So there’s got to be a reason why some people love whole life and some people hate whole life, and they can both be right, but maybe we can come together and be friends. That’s gonna be the goal, this episode.

Nate Scott [03:28]:

So let’s go ahead. And I’m gonna start with the five reasons people think it’s a scam. So let’s start there. I’m just gonna list them out, these five, and then I’m going to, you know, kind of dive into the details of each one.

Nate Scott [03:40]:

So here’s the five reasons why someone, and maybe you’re watching this, would believe whole life is a scam because of these things, and maybe you could bring a whole bunch more. Five is a nice, round number. Okay, so maybe there’s more on both of these lists, but these would be the top five. So the first one that they would say is: whole life insurance is too expensive. We’ll talk about that. Whole life insurance is too expensive. The second reason people bring up is that agents are just in it for the commissions.

Nate Scott [04:05]:

You know, the commissions are too big, or agents are just commission hounds desperate to earn the next check. So the agents have ulterior motives, which is fine. To think they would say that the rate of return is too low. That’s the third one. The rate of return is too low compared to other things you could do with your money. The fourth thing they would say is, why would it ever make sense? Like, to use your own money, you have to pay interest to use it. Like, to take money out of a policy and borrow it out. I got to pay interest to use my own money.

Nate Scott [04:30]:

That doesn’t make any sense. And then the last one is, honestly, a bit more of a talking point. But people bring this up is that the insurance company steals your cash value when you die. They take what’s rightfully yours, and they don’t give it to you, and they steal it from you, and you’re getting some sort of short end of the stick. 

Some of these are very valid, by the way, points against it. Some of them are a bit more like what I would call more of a talking point. And I’m not trying to offend anybody when I say that. I’m just merely saying that there’s some answers to it that maybe it’s a little off base, but either way, so those are the five.

Nate Scott [05:00]:

It’s too expensive. Agents are just commission hounds. The rate of return is too low. You have to pay interest to use your own money, and you don’t even get to keep the cash value when you die. Let’s go ahead and talk about all these. And I’m not going to try to defend whole life. Really, I’m not. I’m truly not going to try to defend it in this.

Nate Scott [05:14]:

I am maybe going to defend it when I talk about the reasons, you know, the people who use it, they like it. They would give these five reasons, which we’ll get to in a second. But for the most part, what I’m saying, I’m trying to bridge the gap here. 

I’m trying to say that the naysayers, you can actually be right on all these fronts. Whenever you talk about whole life insurance being too expensive, number one, the idea is, why would I argue against it like it is? It is an expensive thing. Like it is. There is a real, you know, relatively significant expense to get involved in whole life insurance.

Nate Scott [05:43]:

It’s not a cheap thing. It’s not like, you know, like a bank account is cheap most of the time. Most of them. It’s free. You know what I mean? Like you can put money into a bank account and it doesn’t cost you anything to do it. And so it’s kind of a free thing. Whereas if you put money into a mutual fund, there might be some sort of fee, but maybe you’ll get more for it. You know, like instead of the bank account doesn’t have very, it doesn’t grow very well.

Nate Scott [06:05]:

So I’ll go invest in stocks and mutual funds and there might be some fees involved, but that’s okay because I’m trying to get more. And then real estate is actually pretty expensive to get into as well. There’s commissions to be paid, title fees to be paid, all sorts of things just to acquire real estate and sell real estate. And so what I’m trying to say is that some things are more expensive than others to get into. That’s absolutely true. And I’m not even going to try to argue the point. Yeah, it is kind of expensive to get into whole life insurance. There’s certainly some expense.

Nate Scott [06:30]:

The only thing I would kind of push back on this front, I’m not trying to defend, I’m just merely saying you kind of– It’s expensive depending on, oftentimes, the time frame you look at and what you want to call as expensive. I think one of the things that people will describe is that maybe. 

So in other words, just here, I’m gonna give it to you. Whole life is expensive. I just don’t think that’s a reason to do something or not to do something that’s like, you know, like there’s different models of a Tesla, and you can get an expensive model and a cheaper model.

Nate Scott [07:00]:

And it’s just like, normally things that are expensive, they’re not always just worse than cheap things. Just letting you know. But you are right, though. It’s not a cheap thing. It’s just not. And that’s okay.

Nate Scott [07:11]:

It’s kind of an expensive thing. We believe, and we’ll get to that on the reasons why we do it. But essentially what we’re saying is we believe it’s worth the expense, and you don’t. And that’s a perfectly fine thing to discuss. I believe that it’s worth it, and someone else can go through the exact same knowledge and say, I don’t think it’s worth it, and we can both shake hands, be friends, part ways. So that’s the first one. It’s too expensive. The second one is agents are just in it for the commission.

Nate Scott [07:34]:

Agents are just in for the commission. And, you know, this one is a pretty valid excuse. What I get nervous about, though, is whenever people are saying that, you know, with the reason why I think this might be a bit of a straw man style thing is because now we’re not even really totally talking about the value of whole life insurance. We’re kind of just talking about ulterior motives. 

And we’re saying that the reason why, you know, that whole life insurance is a scam is because people are just in for commissions, it is a sales business. So that there is a truth to that. Just like real estate agents are in it for the real estate commissions and, you know, car salesmen were in it to sell cars.

Nate Scott [08:10]:

I mean, we have to acknowledge that there is an ulterior motive here. They’re exactly correct with an ulterior motive, that there is going to be biases and there’s going to be bad apples anytime things are being sold where people are just in it for the money. In it for the money. 

And I’m just saying, though, that is kind of capitalism, by the way. Like, I believe that I can be interested in earning an income for doing something and that my customers can– We can live in a world in which we have a fair exchange of value where each party can leave the, you know, leave the table feeling good about what they have, right?

Nate Scott [08:45]:

And so, once again, whole life insurance, this kind of fits in with the whole life insurance is expensive. You know, quote, it’s just kind of maybe a bit more targeted at saying whole life insurance agents are scoundrels, in which I would say some of them are, some of them are just commission hounds who are out here trying to make a quick buck off an unsuspecting audience. 

I’m just saying, like, don’t make that a reason not to do something if it would actually help you. Right? Like, hey, there can be– Business is all about trying to find win-win scenarios. It’s that zero sum game where if it makes sense for the agent, it doesn’t make sense for me.

Nate Scott [09:20]:

That’s actually just not a very business savvy way to think of life. Just letting you know. But I’m not going to defend it. You’re right, there’s commissions to be paid. We would also kind of just mention that, you know, like, only ten or 20% of people who try to get into the life insurance business, or maybe it’s even less than that, actually survive in it for five years. It’s very, very, very difficult. I would also just kind of mention on this front that, technically speaking, the insurance company is the one who agrees to pay commissions to the agents.

Nate Scott [09:47]:

It’s not actually the individual purchasing the policy. It’s coming out of the general kind of the insurance company. Of course, it’s involved in the pricing of whole life insurance policies to begin with, but it’s essentially, they’re the ones who just set how much agents get paid based on their. 

How they want to fund their sales force, and knowing that anytime you’re a hunter sales, as opposed to internal sales, there’s gonna be higher commissions. Like, in other words, the total cost of distributing the life insurance policies can be kind of expensive no matter which way you go. So just letting you know that. So agents are just saying for the commissions, there is some truth to this.

Nate Scott [10:20]:

I’m here. I do like to get paid. I do want to be compensated for what I do. That’s exactly right there. And that can create conflicts of interest and ulterior motives. And that’s true. That’s 100% true.

Nate Scott [10:34]:

And that can make people nervous and validly so. So I don’t like, in situations where people can come in with ulterior motives, 100%. So understood. The third point was that the rate of return is too low. They’re essentially saying that life insurance, and this is probably the most common one, of course, it’s just simply saying, like, okay, it’s too expensive, agents are just in for the commissions. 

But if the rate of return was extremely high, like, if we’re earning 20% rates of return in whole life insurance policies every year, I think people would be like, oh, maybe it’s a little expensive to get involved and agents are just in it for the commission, but I’m making a ton of money. And so they would just, they would forgive all of this, but this is where the rubber hits the road, the rate of return being too low.

Nate Scott [11:09]:

And once again, yeah, we would always kind of say, compared to what? Essentially they would say the rate of return is lower for, you know, the growth of a whole life policy compared to, like, the growth of if I just put money in the stock market or something like that, or real estate or something like that. 

And I think, once again, there’s, there is truth to this, that historically speaking, the S&P 500 has earned a higher average rate of return than whole life insurance policies. And we can. This what? And we’re gonna. I don’t want to use this time to defend what I’m trying to say, by the way. So I’m gonna do that maybe in the next five pieces. But the answer is just yes, the rate of return is lower.

Nate Scott [11:44]:

There are other things that you can do that would likely earn a higher rate of return than buying a whole life insurance policy, putting money into it, and letting it sit. Now, of course, when you talk about the infinite banking concept, which we’re going to end up kind of bringing up here in just a minute, of course, the idea is, it’s not like we are not. 

I don’t know about the world, but me personally, I’m not trying to make the argument to convince somebody that whole life insurance is going to produce a higher rate of return than any other form of financial asset, investment, product, anything like that. That’s not actually what we’re doing. 

And I think you’ll see that whenever we discuss why people actually choose to buy it. But the idea is, yes, you are an accurate statement that if you are going to put money into a whole life policy and let it sit there and never touch it and just have it earn a rate of return, that there is likely going to be some sort of other thing that you could do that you could get involved in that would, that maybe would have more risk, but would have a higher potential for more return. And that’s just true. And let’s move on.

Nate Scott [12:43]:

The fourth one is that you have to pay interest to use your own money. Why would I want to pay interest to use my own money? Once again, this one is more of a talking point than anything. You’re not actually using your own money. You have your policy as collateral, and you receive a policy loan from the insurance company. 

It’s actually borrowing money from the insurance company with your money as collateral. So this one’s more of a talking point. But there’s some truth to it that, yeah, there’s this awkwardness of if I put money into a policy and I want to access it, by the way, you can make withdrawals from policies. By the way, you don’t have to take out a policy loan against the policy, which we’ll talk about just a little bit, too.

Nate Scott [13:17]:

But what I’m saying is there is this awkward thing that there’s this interest to pay whenever I use my own money, and that is, I would say that it can be a good and bad thing. I agree. There’s this awkwardness to it. It’s hard to understand why it would ever make sense to do something like that. 

And there’s a lot of education that would get involved into understanding this. That’s one of the cruxes of the infinite banking concept, is trying to describe why it can actually work in your favor to do it this way. But we understand that face value. That is a very awkward thing, and it could come back to bite you. Agreed.

Nate Scott [13:48]:

We’re trying to bridge the gap here. Remember, we’re trying to bridge the gap. Bring everyone into the fold and have some. And shake hands and have some understanding. So, agreed. And then lastly, the fifth one on this, the whole life insurance is a scam is the idea that the insurance company somehow takes advantage of you when you die like that they steal your cash value, they take your cash value from you when you die. 

Nate Scott [14:09]:

And once again, this is once again, kind of a true statement. The idea is whenever you die, you don’t get both your cash value and your death benefit. When you die, you just get the death benefit. The reason why. And so there’s a truth here to some degree. Like, you don’t get to keep both the death benefit and the cash value added together. You get just the death benefit at the time that you pass away.

Nate Scott [14:29]:

But what I don’t like about this one, and I’ll even push back on this one, is that this is a true talking point. And what I mean is talking points based on half truths. If you’re gonna be upset at whole life, then be upset for all the reasons that are valid. But don’t go say things like this.

Nate Scott [14:45]:

Like, it’s just awkward. It’s kind of nonsense. So, in other words, your cash value, by definition, is your equity in the policy. Like, the whole. Like, the cash value is the money the insurance company is building up to one day pay you this big death benefit check. So at any given moment in time, it’s not like they have money to give you a death benefit and money to give you your cash value, as if they’re two separate things.

Nate Scott [15:11]:

Your cash value is your equity in the policy to one day pay you the death benefit. It’s intertwined. I mean, as I said, there’s not like two buckets. It’s like saying that, it’s kind of the straw man thing where you’ll put out there, like, hey, if there was a $2 million death benefit and $1 million of cash value that the insurance company would be able to, should be able to pay me $3 million when I die.

Nate Scott [15:37]:

I’m like, no, the 1 million that they build up in cash value is part of what they’re building up to pay you the $2 million death benefit. Like, that’s the whole point of the cash value, is building equity in this policy. 

Nate Scott [16:22]:

And so, once again, this one’s kind of a weird talking point. Like, it doesn’t make a lot of sense, I guess what people–

The valid point is that if you had chosen to buy term insurance and not buy whole life insurance and then take your money and invest it into something else, then when you die, you get the term insurance death benefit and the investment, and you get both, whereas in whole life, you only get one. 

But what we’re saying, the reason why this is a bit of an awkward conversation is, of course, that’s the case, but we all know that term insurance so rarely ever pays out. If you think you’re going to die within the term period, go buy term insurance as well as whole life, and then you get the term insurance death benefit and the whole life death benefit, and you’ll be better than if you made the investment, like, what I’m saying is, yeah, there’s this–

Nate Scott [17:04]:

When you buy anytime, anytime people buy with term insurance. It’s an awesome investment. Like, it doesn’t make sense. It’s very difficult to understand the risk calculation there. In other words, if you buy term insurance and die with term insurance, then you are going to have one of the best rates of return of your life, because that’s what term insurance does. The chances of you dying is, of course, astronomically small. They know that. That’s why it’s priced the way it is.

Nate Scott [17:31]:

So during the term period that you’re alive. So what I’m saying is, yeah, there is a truth that if you had bought term insurance and made investments and died within the term period, you get both. But since 99% of term insurance policies don’t pay out because you don’t die during the term, then your term is going to expire and just going to have the investment. 

So what I’m saying is, once again, this is a bit more of a talking point. Like, the actual accusation doesn’t really make a lot of sense. And if you want to have both the whole life death benefit and term death benefit and die within the term and have a ton of money sent out to you, that’d be great. It’s not either or scenario, so I hope that makes sense. Those are the five reasons that whole life insurance is claimed to be a scam.

Nate Scott [18:05]:

Now we’re going to transition to why do other people like whole life insurance? What are the five reasons why people would even get involved in this to begin with? Like, if we have all of these, it’s expensive, agents are in it for the commissions, there’s these ulterior motives, the rate of return isn’t as high as potential other investment alternatives and different capital alternatives, II have to pay interest to use my own money and the insurance company steals my cash value when I die. 

Why would anyone ever choose to do this? Well, let’s just try to bridge the gap here. Let’s try to bridge the gap and maybe we can become friends and you can choose not to do it. I can choose to do it and you can maybe understand why I don’t. And I can understand why you don’t.

Nate Scott [18:38]:

So the first one that I wanted to say about whole life insurance is that the honest truth is that when you build policies for cash value, the long term growth is often better than other alternative safe places to store money. So if we’re talking about a safe place to store money, whole life insurance really has reigned king and remains to reign king in the world. As far as the actual long term growth, especially if you build the policy to accentuate cash value, there are some duds out there in the marketplace. 

I mean, there’s some crappy whole life policies, some crappy agents who build crappy policies and that really don’t produce much long term growth at all. Those exist, there’s no doubt. I’m just saying if you’re going to kind of give a best case scenario, you get a good whole life policy designed to accentuate cash value and you’re going to get, oftentimes over long periods of time, a better growth utilizing this policy than you would with other types of safe places to store money. 

Especially when you involve the tax advantages of using whole life insurance policies that as the policies grow with interest and dividends, there’s no tax on that growth, there’s no tax on the buildup compared to like if I use high yield savings accounts or bond funds or things like that where, you know, the majority of these would be taxable the year that the interest is paid. And it’s really going to drive down the growth ability of that, of that account.

Nate Scott [19:52]:

So when you actually look over long periods of time, you’ll notice that it is true that they’re really– It is kind of almost objectively like it is, at least we can agree that it is one of the best places to store capital in a tax free area. Of course, that is safe and that is liquid and some things of that sort that it really does rain supreme. Now you might say I’m not a candidate for that type of money. Like, I don’t need safe money. I just don’t need it.

Nate Scott [20:23]:

Like I’d rather go invest in the market that has some volatility, but I don’t need any sort of safe place. And we say, okay, that’s fine, maybe it’ll work out. Well, maybe it won’t. You know, the future’s uncertain, but nonetheless, that’s great. Just know that some people like having, you know, choosing to put money into the best long term safe instrument that they can really find. Especially when you involve all the tax advantages of the policy. You know, it really is pretty nice.

Nate Scott [20:49]:

What I’m trying to say is like if a policy grows by 4% over a 30 year timeframe and you were going to compare that to an account that you had to pay taxes on just to get that net of the 4%, you would have to essentially create a growth of closer to 6%, to be able to net your 4% and pay tax, depending on your tax bracket. 

And then when you include the idea of having the death benefit and some of the other benefits of having whole life, you’re like, this is actually like, you’d be hard pressed to find this over long periods of time. That’s all we’re saying. It’s a very valid, solid instrument for safe storage of capital. And that’s better than what we can typically find over long periods of time. 

Maybe in short instances, maybe short term treasuries for a period of time might be bigger than the growth of a policy in that moment, like what we may have seen in the past six months or so. But what we’re saying is over 30 to 40 years, it historically has been, and still is, especially when designed for cash value, one of the best places to store safe money.

Nate Scott [21:53]:

So there’s that. That’s why some people would choose to do this. The second reason is that there is a benefit to being able to access money contractually at any time under pretty favorable conditions. Which is funny that we say this when the other people say that you have to pay interest to use your own money, and so they say, that would be stupid. I would never do that. Where you have other people on the whole life side. That’s like, I like the idea that all of this cash value is usable for me to achieve whatever it is I want to achieve with money.

Nate Scott [22:23]:

Not whenever I’m 59 and a half, like, not after I retire, but, like, right now, every day, all day, all the time. And you could be the person who says, I don’t need that type of access. I’m fine letting it sit, and I never plan on touching it. But then you’d have to understand that that would be a benefit to some other folks that may be in different positions than you. 

So, once again, we’re trying to bridge the gap that in policies, you have the contractual right to take a policy loan, or just render it, or to withdraw from it. You know, the cash value, but, you know, the most common way to access it is through the policy loan feature that allows you to borrow against the policy up to, like, the full cash value at any time. It would be a tax free transaction. And there is, and it’s the only place in the world that offers you what I call an interest only line of credit for life.

Nate Scott [23:08]:

It’s the only place in the world that offers this. So, in other words, whenever you borrow money from the policy, you can pull out as much as you want, you can repay whenever you want. It’s like a line of credit. Like we can, we can, we can pull out whenever we want, however many times we want, just like you would with like a home equity line of credit or something like that, where we pull from it, we repay it, and the only thing that we have to do is pay interest once per year. 

And then even technically with that, you can let it roll into the loan balance. If you happen to be short on cash in a bank account at that time, you could just use the policy to pay for its own interest if there’s cash value available and stuff like that. But what I’m trying to say is, it’s an interest only line of credit for life, which means I never have to repay principal unless I choose to. As long as I pay interest each year, and it’s for life, there’s never an end date to it.

Nate Scott [23:52]:

This is a unique thing, is all I’m trying to say. We have to at least give credence to the fact that it’s a unique thing in the financial world, and we’ll leave it at that. All I’m saying is there’s a big group of people, me included, that would like to choose to pour a lot of money into, like, point number one, a long term growth oriented place that I think is safer and more growth oriented in that asset class of safeness. 

And I can use it at any time to achieve other things. This is a big deal. So we’ll talk about that even more in just a second. But then the third thing that we’ll talk about is that there’s kind of a built in estate and legacy planning involved in whole life insurance. Like everyone, everyone would agree in estate planning that there can be a role for whole life insurance policies.

Nate Scott [24:37]:

Nobody ever dies with a whole life insurance policy and regrets having the whole life insurance policy the day that they die. That’s not a thing. It’s one of the best assets to pass away with and to leave money for the next generation. It always has been, always will be. That’s its primary function. The primary function that exists in the marketplace is to pass a death benefit down to the next generation in a very seamless way. So there’s kind of a built in estate and legacy planning to a whole life policy, which sounds really nice to a lot of people. There’s a benefit to this.

Nate Scott [25:05]:

It’s simple, it’s easy, there’s no risk to it. I know that the day that I sign up for the policy that my family is going to have this money whether I die during a term period like with term insurance, or whether I live for a long time, that there is this built in estate and legacy plane that’s guaranteed to end up happening for them.

That’s a benefit. Let’s just at least say it’s a benefit. You could say that you don’t want to do it, but that’s fine. But there’s a built in estate and legacy planning already. That’s like a common estate planning thing for, especially for wealthy people who want to leave money to the next generation.

Nate Scott [25:36]:

That whole life insurance comes up in those types of conversations all the time because of the natural benefit to leaving a state through a whole life insurance policy. That was the third one. The fourth one is that, you know, why do people like whole life? It’s that they understand that we can use these policies and use this cash value to fund other investments. I mean, this is the big kicker. 

This is what infinite banking is all about, is the idea that, yes, I understand that there are other investments that can do better than my policy can do, and I’m just going to– But that’s the reason why that doesn’t bother me is because we like to think in a scenario where I can put money into a policy, save it there, store it there, and then borrow against it to go fund these other investments, that will produce a potential higher yield. Of course there’d be more risks to it, but everyone who listens to the show knows that I invest money.

Nate Scott [26:26]:

I just use my policies as the springboard to achieve those things. That’s what we’re doing. So whenever someone says, like on one side, whole life insurance doesn’t provide a very good rate of return, and that’s why I’m not going to do it. I would rather go do something else. We would say, well, we agree it’s not the best rate of return in the universe. There’s things that you could do that would likely benefit at a higher rate of return. Why we’re doing whole life, in spite of knowing that, is that we also are aware that we can leverage the policies to achieve those things.

Nate Scott [26:58]:

And that’s where the infinite bank concept comes in and shines. You know, that’s the whole discussion is the idea that, hey, I can have the benefits of this whole life policy and I can use it to help fund other investments that maybe would produce higher rates of return and take advantage of opportunities, because I have all this liquid, safe money in my pocket. 

So, once again, we understand, like, we can agree with you that saying the rate of return is not as high as some other things may be. We would just say, let’s use the policy to help fund those things. That’s why someone like me would choose to do it, in essence. And then the fifth one is that it can produce safe, tax free, passive income later in life. This is a reason why a lot of people would say it’s not exactly a scam, it’s just a good thing to have.

Nate Scott [27:41]:

Maybe you have investments in mutual funds, maybe you have investments in 401(k)s and IRAs and stock market things. Maybe you have real estate, maybe you have all these buckets of money, and you are thinking to yourself, it would be nice if I had a bucket that’s just safe, steady, consistent, tax free bucket that I can use to kind of produce some passive income that’s not dependent on renters and real estate markets and stock market bubbles. And I just have this buffer from all of that. 

And so a lot of people would choose to use whole life insurance to fit that bill, whether or not they’re infinite bankers or not. It’s just kind of a benefit to have. And there’s some peace of mind involved in having this safe place that, yeah, the rate of return might not be as high as if we invested in bitcoin whenever it was only $1,000 per coin. 

Or, I mean, there’s other things that you can do, but it might be nice to have not all of the money at risk, doing whatever it is that you’re doing, and maybe have some in this other bucket. And so, I mean, given, I would like to have that bucket be really big, and then leverage from that bucket to go fund other riskier things potentially, that might produce higher rates of return, but some people will just use it as a different bucket, and that’s fine.

Nate Scott [28:51]:

So, in other words, those are the five reasons why people who do like their whole life insurance policies, why they would give to say that they like it. They like the idea that the long term growth is oftentimes better than the vast majority of other safe places, especially when you involve the growth and the fact that it can be accessed tax free. 

The idea that you can access money contractually at very under favorable conditions is a big deal for people who want that to be as part of their financial plan. There’s built in estate and legacy planning from day one, the day that you buy the policy until the day you die. There’s this guaranteed windfall that’s going to occur for their family. And that can be nice. It’s a benefit to you. You can use the cash value to fund other investments.

Nate Scott [29:34]:

In other words, yeah, we agree that the rate of return might not be the greatest thing of all time, but we can then use the policies to achieve things. I’ve got plenty of investments that I’ve used policies to fund that have produced for me a much higher rate of return than the policy would itself. And great, I can have both at the same time. That’s the Infinite bank concept 101. That might not be you, though. You might just be like, well, I’m not going to use my policy to fund investments, so I guess I don’t want to do it. That’d be fine.

Nate Scott [29:56]:

We can shake hands and be like, you guys are awesome, but don’t get mad at us. Don’t think that we’re stupid and, you know, doing something that’s ridiculous. We’re not. It’s just like, we like all these things. The fifth one is that it does have the ability to produce safe, tax free, passive income later in life that many people would like. Maybe they’ll have income coming from other places.

Nate Scott [30:16]:

Maybe, as I said, maybe they’ll have 401(k)s, IRAs, mutual funds, all these things. But it’s nice to not have everything coming from there. It’s nice to have this other place that’s totally non correlated with any of that, to serve as a buffer in case things don’t go well in certain other areas. 

It’s nice to have the most consistent, steady financial tool that’s ever been created by mankind. That’s whole life insurance policies. It’s pretty cool. So I hope this has been helpful. Once again, as I said at the beginning, the goal of this was to kind of bridge this gap here so that people can have valid objections to why they’ve avoided whole life, why they hate it.

Nate Scott [30:48]:

Because of that, they won’t do infinite banking. And that’s fine because you. Because all yours can kind of be. There’s an accuracy to the vast majority of your accusations, you know, especially, like the idea of it being too expensive and stuff, all this. Yeah, we agree. Then again, we would say on our side of the camp that, yeah, we also have a lot of reasons that we do like it, and maybe you just don’t happen to fit the criteria for someone who would like it. And that’s perfectly fine.

Nate Scott [31:14]:

But I just get kind of tired of the polarizing content of, you know, it seems very one sided to the polarizing, hey, whole life insurance is bad for everybody, and it would be stupid to own it. That, to me, that’s too strong of a statement. I would ask that we come together as friends and just say, hey, there’s a purpose to it. There’s a point to it. 

You can benefit from it if you want to, especially if you fit the idea that these five things are things you’d like to take advantage of in your own personal life. If it’s a good fit. I hope that’s been helpful to you guys. It’s been so fun to have you on here again.

Nate Scott [31:48]:

And by the way, if this show means something to you, if you’re really enjoying learning these lessons, a like, a comment, a subscribe on the YouTube channel, a review on Apple Podcasts, or Spotify wherever you find this content means the world to us and helps the algorithms know that this is good stuff that other people should be listening to. 

So, man, it would mean the world to us to help boost this community in that way. But, guys, this has been Dollars and Nonsense. If you follow the herd, you will be slaughtered. And always remember, if you want to learn more about infinite banking, I’ve got a free course on our website. You can go to livingwealth.com/escapethebank and sign up for our free infinite banking course, which I really believe does an amazing job taking you from A to Z on how infinite banking works and how you can implement it in your own life. So go ahead and take advantage of that at  livingwealth.com/escapethebank. We’ll see you there. Bye.