We are often asked, what is a Family Banking Plan?  The Family Banking Plan is a proven system of steps and strategies that have been used for decades also know as Infinite Banking or the Infinite Banking Concept. The plan is established using a series of properly structured permanent whole life insurance policies typically on yourself and your family members. No this is not just another sales pitch or scheme to sell you more life insurance. This is a method that has been in use for decades by wealthy individuals, banks and corporations to create and preserve wealth.

So why a life insurance policy you ask. The proper policy structured correctly will provide you with many benefits that are simply not available in any other financial vehicle. Some of these include:

  • Guaranteed Returns
  • Possible Dividends
  • Favorable Tax Structure
  • No Penalties For Early Withdrawal
  • No Required Minimum Distribution
  • Liquidity, Use and Control
  • Finally a Tax Free Wealth Transfer

It is important to note that in order to have these benefits that you must have the right policy structured in the right way and used in the right way.

The general concept of the Family Banking Plan is that you overfund the policy to put as much cash as possible in it while still keeping the policy from becoming what is referred to as a MEC or Modified Endowment Contract. During the first phase or capitalization period, as you pay premiums into the policy you are creating cash values which will be used in the second stage to use for banking. What we mean by this is that you will be using the policy to finance large dollar purchases for your family or business versus taking a loan from a financial institution. The reason that you want to do this is to recapture those wealth transfers that we discussed earlier.

As the policy holder, you are allowed to borrow the entire cash value of your policy at any time without any type of qualifying. Think about this for a minute, the insurance company will lend you the money you need when you need it on favorable terms (based on the cash values of your policies).

The best part of this is even though you borrowed the money, the insurance company continues to increase your cash values and credit dividend. This is because they credit the interest and dividends based on the amount of death benefit you have, and the cash values in your policy are actually used as the collateral for the money you borrowed, which comes from the insurance companies general fund and not your policy specifically.

What this allows you to do is to become your own banker and recapture those nasty wealth transfers. You can now loan yourself the money you need and pay all of the interest and principal back to yourself.

Another strategy we use in your Family Banking PlanSM is something called a paid-up-additions rider. The paid-up- additions rider is used to reinvest both your dividends and any surplus interest payments you make back into your policy. A surplus interest payment occurs when you charge yourself or your company more interest than is required to make the policy whole. By using the paid-up-additions rider you are increasing not only the cash value of your policy but also the death benefit.

When you start your Family Banking PlanSM you will be funding a permanent life insurance policy issued by one of the strongest life insurance companies in the world which also happens to be a mutual company. A mutual company is owned by the policyholders and therefore makes decisions based on the long term viability of the company not the short term wishes of shareholders. The life insurance companies the Alliance Group works with have long, stable financial histories that include paying dividends even when market conditions were unfavorable.

People tend to think that banks of the best place to keep or store money, however insurance companies just like banks are highly regulated and are actually required to set aside significantly more capital in reserve that banks.

Another factor in creating financial certainty with your Family Banking Plan is how insurance companies invest.

  • The majority of life insurance investment holdings are in investment grade fixed income assets such as long-term bonds and commercial mortgages.
  • In the United States life insurance companies are regulated by state regulators.
  • The majority of states require insurance companies operating or doing business in their state to become a member of that states insurance guarantee association and pay an insurance premium tax as a way of creating an insurance backup plan to be used by the state in the very unlikely event an insurance company in their state failed.
  • These insurance guaranty association’s are designed to provide additional financial backup over and above the assets of the insurance company for the protection of the policy holders. This is like having an insurance policy on the insurance company that provides additional guarantees.
  • During recent economic downturns most insurance companies incurred very minimal losses because of their conservative investment portfolios.
  • Mutual insurance companies do not have stockholders because they are owned by the policyholders. Mutual insurance companies do not have stock that is traded on the market so they are not subject to market volatility in the same way that stock insurance companies might be.

The bottom line is that establishing a Family Banking Plan is probably going to be one of the best financial moves you ever make. It is not a get rich quick scheme, it is a plan that requires commitment and careful management to make sure that you follow the steps to create financial certainty.

So you might be asking yourself, if this plan or system is so good then why don’t more people use it. Well the simple answer is that there are a lot of people and companies that use these strategies. Simply put it takes someone knowledgeable in the process to set up the policy. These policies are very detailed, and if set up incorrectly they won’t end up doing the job that you need them to do.

Some other factors are:

• Many insurance companies actually don’t know how to set the policy up to emphasize the living benefits.
• Most insurance agents have never done this, and many don’t even know the option exists.
• When compared to other policies, insurance agents don’t receive a substantial commission, so they are less likely to mention it in the first place.
• A number of insurance companies just don’t offer the right kind of policy as they are not mutual companies.

The good news is that the advisors at AllianceGroup have been specially trained to properly structure banking policies so that you can achieve the maximum benefits possible with the minimum risks possible.