Blog 79 – When To Pay Cash And When To Use A Policy Loan

One of the questions we more often have from our clients is: Should I pay for this expenditure with the cash I already have in my conventional bank account, or should I first deposit that cash as an unscheduled PUA contribution to my IBC policy and then use the cash from a policy loan to purchase the needed item? What they are really asking is if there are any special conditions or guidelines they should consider before deciding whether to use cash or a policy loan for their expenditure.

It is worth noting at this point that when you take out a policy loan, the money does not come out of your IBC policy, but the insurance company is providing you the funds from its general account and charging you a loan interest rate. Meanwhile, the cash value of your policy is collateralizing your loan and it is simultaneously earning interest and dividends.

There are several things to consider before deciding whether to use cash or a policy loan, the first of which is the nature of the expenditure itself, because not all expenditures are the same. If the expenditure is 1) a lifestyle “necessity” (for example, fixing the roof, replacing a used-up car, or paying for self-improvement courses), 2) a reduction of debt, or 3) an investment, our preference is a policy loan after contributing the cash in your conventional bank account as an unscheduled PUA to your IBC policy.

These types of expenditures, giving the design of IBC policies, conserve and grow the wealth we already own. In fact, the increase in wealth generated by the injection of cash into our policy will partially offset the interest charges on the loan, and long term, it has the potential to completely offset the entire loan balance. In fact, lifestyle necessities can be thought of as repairs, maintenance, and replacement costs of facilities and infrastructures that serve to increase our future production and/or future revenue, and therefore, increasing cash flows and net worth. Debt reductions serve to increase cash flows, and therefore, increase net worth. Similarly, investments appreciate and then can be sold for a profit, increasing cash flows and net worth.

Now, if the expense is a living expense such as food, gasoline, or utilities, they should be paid for with cash from your conventional bank account, not policy loans. If you are truly attempting to manage your money well and grow your wealth, you should draw the line between lifestyle necessities that affect the growth and value of your estate and those that don’t. Otherwise, you would wind up using your IBC policy as though it were an ATM machine practically every month.

If you would like to learn how you can grow a substantial amount of cash that you have access to at any time without penalties, is unrelated to the stock market, and will generate income that is not included in your tax return, visit our website at  or feel free to email us your questions at or call us toll-free at 1-844-443-8422.

Isis B. Palicio, LUTCF, MBA
Pedro A. Palicio, MBA, Ph.D.
Infinite Banking Concepts® Authorized Practitioners

We are experts in designing high cash value dividend-paying whole life policies.

Blog 79 – When To Pay Cash And When To Use A Policy Loan

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