Infinite banking policy is based on the infinite banking system, which follows the same principles but allows everyone to adjust their policies to their lifestyles, making the system sustainable in the long run.
To even start with lifestyle banking, you need a whole life insurance policy that will serve as the foundation for what’s to come. One of the most common questions we get is:
Are there any conditions to getting an infinite banking policy (lifestyle banking policy) and using the system in day-to-day financial decisions?
The answer isn’t a simple ‘yes’ or ‘no’.
Let’s explore this further.
What is Lifestyle Banking?
Lifestyle Banking is a system based on the whole life insurance policy people use to save money and build wealth.
Some of the basic misconceptions people have about Lifestyle Banking are that you can’t build wealth through insurance and that it is a scam that will only cost you money.
The truth is that you can build wealth through this system, and it is definitely not a scam! A large number of people are using whole life insurance as their basis and even have multiple policies that they use until they max them out.
But the truth is also that Lifestyle Banking isn’t going to help you get rich quickly, and it takes a good understanding of finances and the markets to make the most of it. If you’re unwilling to learn and grow financially as well as be responsible and contribute monthly premiums, Lifestyle Banking isn’t for you.
How Does Lifestyle Banking Work?
We’ve written about how Lifestyle Banking works in detail, but some of the basic concepts include:
- Having a whole life insurance policy
- Paying premiums and having uninterrupted cash value growth
- Borrowing against your life insurance policy by taking loans
- Using that money for spending and investments
- Paying back loans and recapturing interest
- Repeating the process over and over again
Whole Life Insurance Policy (Infinite Banking Policy) Is Integral To Lifestyle Banking
We’ve mentioned whole life insurance policies a few times and said how they are an integral part of the lifestyle banking system.
While there are a large number of benefits that are tied to using your whole life insurance and even having whole life insurance in the first place, that’s not what we will talk about here.
Instead, this is where all the conditions are for starting a Lifestyle Banking system. Nobody can prevent you from applying Lifestyle Banking, since this is a strategy and a system you follow. But to do that, you need life insurance policies (one to start with, but more along the way).
And there’s always a chance for a life insurance company to reject you for whole life insurance. And without it, it is impossible to start banking and building wealth in this particular way.
Even if you are eligible to get a custom made whole life insurance policy, that doesn’t mean that this system is for you. But before we address that, we need to see what it takes to get whole life insurance so that you know immediately if you are able to proceed or not.
Age and Gender
Both age and gender play a large role when you are buying a whole life insurance policy. There aren’t any restrictions here. You can get whole life insurance at a young age. Sometimes, it is advisable to get the policy earlier in life. Why?
As you grow older, life insurance companies tend to charge higher premiums. This is because the mortality rate increases with age, and older people need to pay the death benefit sooner. The younger you are, the lower your premiums.
When it comes to gender, there have been some differences in how monthly premiums are calculated. Mortality rates and life expectancy differ for men and women, and this is something life insurance companies take into question when they create whole life insurance policies.
Below, you can see the chart showing different life expectancies for men and women:
Height and Weight
When creating whole life insurance policies, life insurance companies also take your height and weight into consideration. In fact, they want to measure your body mass index (BMI) to evaluate your weight relative to your height. Higher BMI values indicate a higher risk for certain health conditions, such as:
- Heart Disease
- Other illness
The higher your BMI, the higher your monthly premiums on the whole life insurance policy will be. However, each company has its own underwriting process, which can vary slightly. Providing false information on your height and weight can result in a denial or a policy cancellation.
Past and Current Health Conditions
Your past and current health conditions have a significant impact on whether you get or don’t get the policy and what your premiums will be. It is all about the risk assessment for the life insurance companies, and there are a few things that they consider here:
- Medical History – Your mutual insurance company will look at your medical history, including your past illnesses, surgeries, hospitalizations, and chronic conditions, if any. This will help them decide how much you pay in premiums for your whole life insurance policy.
- Current Health – Other than your health history, they will also check your current health. Sometimes, life insurance companies may require a medical exam, but other times, they can ask you to fill out a health questionnaire.
- Pre-Existing Conditions – If you have any pre-existing conditions (which are visible at the time of the application), your selected life insurance company will take that into consideration as well. Certain medications and treatments can indicate your underlying health conditions, which can increase the potential risk and your premiums.
Health History of Your Parents
Most life insurance companies don’t take the health history of your parents into account when deciding on your permanent life insurance policy. However, underwriting processes vary from one whole life insurance company to the next, and some may ask you about the medical history of your parents, especially if there are some genetic conditions that you may have inherited.
People who are actively using substances or have a substance abuse history will most likely get rejected when applying for whole life insurance policies. However, this isn’t specific to just whole life – it also extends to other policies such as universal life, term life insurance, participating life insurance, etc.
You’ll find it hard to sign any life insurance contracts and get the policy that will help you act as your personal bank. Some of the best life insurance companies may offer you the option to work with their agents, who will help you with the rehabilitation program and create a sobriety period after which you will be permitted to get your permanent life insurance policy.
You can receive your whole life insurance policy if you haven’t been actively using any substances in the past X years (the condition can depend on the insurance provider), but even if you become eligible, expect to see higher premium payments.
Credit and Performance History
If you are looking for an infinite banking policy, you don’t have to worry about your credit score and market performance history. Life insurance companies don’t take this into consideration for a whole life insurance policy.
Usually, when getting auto or home insurance, the agents will take your credit score into account, but not with whole life insurance.
However, having a positive credit and market performance history matters in the sense that you know how to use your money. Therefore, paying higher premiums every month for your whole life insurance policies will not be a problem. This will also allow you to take out your policy loans and have uninterrupted cash value growth.
This is the part where you use loans instead of your life insurance cash to cover your spending and investments and allow your whole life insurance to blossom.
Most permanent life insurance providers will take your criminal record into account during the underwriting process. It is important to answer questions truthfully. Otherwise, they can deny you the whole life insurance policy.
For permanent life insurance companies, issuing a whole life insurance policy is all about risk assessment. While they are willing to provide you with adequate life insurance coverage and a death benefit, they need to assess the risk well in order to profit. Therefore, they can easily reject you if you apply for cash value life insurance and if they consider you to live a high-risk life that can result in premature death.
It’s just how the life insurance industry works.
Dangerous Hobbies and Activities
Engaging in dangerous hobbies and activities isn’t recommended for everyone who is looking to get a permanent life insurance policy with a trusted insurance provider such as Mass Mutual or other whole life companies. Why?
Whole life companies see this as a risk, and this can lead to higher premiums and, in some cases, exclusions or limitations on your life insurance coverage.
Get Your Life Insurance Products From Mutual Insurance Companies
Now that you know everything about getting life insurance policies, there’s one more differentiation we need to make before we proceed to talking about the use of your whole life cash value insurance policy, loans, the Lifestyle Banking system, and how it can help you earn more money.
And that is where you get your permanent life insurance products. When it comes to whole life insurance policies that you want to use for Lifestyle Banking, it is best to get them from mutual whole life insurance companies. We’ve already mentioned Mass Mutual, but there are some other household names, such as Northwestern Mutual, Penn Mutual, and others.
Our Wealth Nation team can also help you get fully customized whole life insurance policies that you will use for cash value accumulation and Lifestyle Banking.
Why Mutual companies and not stock ones? Mutual companies are paying dividends to anyone who has a policy of any kind, whether it is participating whole life insurance, term life insurance, universal life insurance, or other life insurance products. As long as you pay premiums, you can expect to receive dividends at the end of the year if the company is profitable.
This can provide a nice boost to your finances and put more money in your hands that you can contribute to premiums or get another whole life insurance policy.