What is a Private Reserve Bank?
To understand what a private reserve bank is you must first understand the private banking concept also known as the infinite banking concept. The private banking concept is the strategy of using a properly structured whole life insurance policy to potentially accomplish the following things.
- Provide an inheritance
- Build cash value
- Minimize or eliminate the need to borrow from financial institutions
- Make large purchases such as automobiles, homes, furniture with the access to the cash value
- Minimize or eliminate the need to borrow to fund college education
- Have access to cash to fund potential investment opportunities
- To fund a retirement
The private banking solution can be used for individuals or families. In other words, their can be a private reserve bank or a family bank or both. A private reserve bank or family will consist of three things:
- A whole life policy
- A paid up rider
- A term life rider
Whole Life Policy
Whole life is a permanent life insurance policy that has three major features: death benefit, cash value, and level premium. For more information on whole life policies go to the whole life page.
Level Premium– The cost of the premiums never increase.
Death Benefit– The amount paid to the beneficiaries.
Cash Value– An accrued savings plan inside the life policy.
Paid Up Rider
Paid up riders are paid up additions to permanent life insurance that allows for increases in the cash value and the death benefit. A rider is an insurance policy provision that adds benefits to or amends the terms of a basic insurance policy to provide additional coverage.
Paid Up Riders are also known as “Paid Up Additions”. Paid up additions or riders are used to overfund the policy thereby accelerating the cash value. Paid up additions may also increase the death benefit.
Term Life Rider
A basic insurance provision that adds increased death benefit coverage for a specific length of time, is called a term life rider. The term life rider enables you to do two things things immediately, overfund the policy and increase the death benefit.
The are overfund limits to a life insurance policy. That is what prevents a policy from becoming a investment product as defined by the Securities Exchange Commission (SEC). If you overfund a life insurance policy too much it becomes what is called a Modified Endowment Contract (MEC).
