Blog 95 – Pay Cash Or Take A Policy Loan?

When our clients need to purchase or pay for something, they often ask us the following question: “Should we pay for this with the cash we have sitting in our bank account, or should we first put that cash in our IBC policy and then take a policy loan to purchase the needed item?”

Let’s analyze the type of individuals who ask this question. These people have the cash available at their disposal. They are obviously not cash-strapped individuals and the cash in their possession tells us of their discipline. These individuals already own one or more IBC policies, which is another sign of people with elements of financial maturity.

These individuals know that the design of their IBC policies will generate more cash value, more dividends, and more death benefit every time money is contributed to the policy’s PUA Rider. These people also know that when they take a policy loan, the money comes not from their cash value but from the general account of the insurance company collateralized by the same amount of cash value which remain in their policy earning guaranteed interest and dividends. They are also aware of the annual interest rate that the insurance company charges for the loan.

There are several things to consider before deciding whether to use cash or take a policy loan. The first concern is to determine if the expenditure we have in mind is a lifestyle “necessity”, a reduction of debt, or an investment. If it is one of these types of expenditures, our personal preference is to take a policy loan after we have contributed the cash to the PUA Rider of our policy. The resulting cash increase will partially offset the interest charges on the loan.

Lifestyle necessities can be repairs, maintenance, and replacement costs of facilities and infrastructures that serve to increase our future production and/or future revenue. Debt reductions serve to increase net worth. Investments appreciate and then can be sold for a profit. All three of those types of expenditures contribute to building our estate in the long run and are appropriate expenditures for taking a policy loan.

On the other hand, living expenses such as food, gasoline, utilities and similar consumption costs are completely different types of expenditures that should be paid for with cash, not policy loans. You don’t want to use your IBC policy like an ATM machine 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.

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