Private Family Banking Structure, Liquidity

5-ish Minute Private Family Banking Podcast.

Private Family Banking Structure, Liquidity

Private Family banking is a long-term financial strategy. We teach people how to leverage a high cash value permanent life insurance policy to take control of their household finances.

In this episode, I discuss the general structure of a Private Family Banking policy, why that matters and talk about what this strategy offers, starting with a very important aspect - liquidity.

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Transcript

SPEAKER_00 0:20

Hey everyone, thanks for joining me for another episode of the Five-ish Minute Private Family Banking Podcast. I started the podcast out in episode one by highlighting several of the benefits of utilizing private family banking as a strategy. I asked a pretty long question. I asked the question that if your dollar could be liquid, if it could be safe from market volatility, if it could be growing uninterrupted, etc. And if your dollar could be used for a number of different things like college savings, major medical expenses, major life purchases, etc. And if that dollar could be used more than once, would you like to learn about it? That's a very brief summary of what I talked about in episode one. To hear the whole thing, I recommend you go back and listen to it so that you could get a better feel for what I actually said. After that, I covered some of the reasons why high net worth individuals tend to like to keep large sums of money inside of whole life insurance policies. But I did promise to go back to some of the stuff that I said in that first video. And I so I need to make good on that, and and that's what I'm going to do today and over the next several episodes. I'm I'm going to try to step through this in a way that makes sense. And to do that, I probably need to start by explaining exactly what this strategy is at its core. What I'm talking about when I talk about private family banking is a strategy which uses a whole life insurance policy as a vehicle to finance things in your life. In our case, we stop thinking about life insurance as a product and we start thinking about life insurance as a process. It's not get rich quick, and it's not some new untested uh strategy that someone came up with just to sell life insurance. In fact, a life insurance agent will typically reduce his commission by as much as 60% simply by structuring a policy in a way that benefits the client for this strategy. So, how do we structure a policy to maximize it for this strategy? And why do we do it that way? Private family banking uses whole life insurance policy from a mutual life insurance company as its base element. Whole life insurance will build cash value. Um, and whole life insurance purchased through a mutual life insurance company will earn a dividend every year, uh, which is a pass-through of the profits of the company to the policy owners. Building and growing that cash value is the central goal of this strategy, but a traditional whole life insurance policy will not offer all of the benefits that we're looking for. So we only take about 40% of someone's premium and we apply it to that whole life insurance policy. We take another portion of their premium and we purchase a term insurance rider. Um what this does is it jumps, it's a it's a cheap way to increase the death benefit. Okay, we then take the remainder of that premium and we apply it to what are called paid up additions. Paid up additions provide two benefits. First, it's cash inside the policy, which you can leverage for the things that I've mentioned before and the things that I'll talk about in the future. And second, it's purchasing future life insurance, which means the death benefit will continue to rise over time. Because of this, we don't typically ask how much death benefit somebody is looking for. When you're purchasing a term life insurance policy, somebody may say, How much do you want a million dollars? Do you want a million and a half dollars? Whatever. We don't ask that question. The death benefit is important and it will give you protection and the peace of mind that you may be looking for. And down the road, I'll talk about something called human life value, which actually puts emphasis on how big of a death benefit you might want and why it might be larger than you probably think. But for now, the primary goal of this strategy is to build cash value as rapidly as possible so that you can put it to work. So rather than ask how much death benefit somebody is looking for, I may ask how much are you able to contribute on a monthly or annual basis? And when we approach it this way, we build a pool of capital that is called your cash value inside the policy and that you can have access to whenever you need it. And that brings us to the first benefit that we mentioned in episode one, liquidity. Cash value inside your policy is accessible to you if your water heater dies, if you have a large unexpected medical bill, if you need to purchase a new car, if you want to get in on a cash-flowing investment deal of some kind. As long as you've built up the level of cash value that's required for what you're trying to do, it does not matter why you're asking for it. The cash value that you have is yours to access. No loan applications, no credit checks. It's yours. Understanding this is the first step to changing how you view life insurance. No longer is life insurance an expense. It's money going out. Instead, now it's an asset that gives you a pool of capital that you have access to. Now you can rest easy knowing that you're not spending your money on a life insurance policy. You're not sending that money away, never to be seen again. Instead, you're building an asset. In the next however many episodes it takes, we'll continue to walk through some of the benefits and uses of private family banking. So please like, subscribe, do all the things that everyone always asks you to do. Share this with a friend, and I'll see you next time. Until then, out.