Almost gonna sleep. Rinsing my mouth with salt water, so I got a minute or two to type out a short summary of my morning meeting today. The corporation is Bloom Strategies, and they specialize in a system called the infinite banking concept. Basically the gist is that you don't have to borrow from the bank. You take out a loan against your whole life policy, and finance your life that way. Apparently the dividends paid by the whole life policy is higher than that of GICs and even bonds if you hold your money in banks, and the dividends will never fluctuate with the market. Gonna investigate some more and I'll get back to you all whether this is worth your time checking out or not.
EDIT: Had a chat with Jack yesterday, and it was very very enlightening. Basically when one gets an insurance policy, one can choose from different types. Three big ones are participating whole life, universal whole life, and term policy insurance.
Term policy is good when you don't need life insurance for that long. But the bad thing is, once you stop paying, your protection is gone. So term is good if you have a huge mortgage, and you don't want your family to have to deal with it if you die, so you get the term policy until you pay off the mortgage, then you cancel the term policy. The term policy is the cheapest for short term protection.
Universal Life is basically paying some premiums per year (aka a set amount of money) for 20 years, or however many years the contract states. The money you put in is then put into investment vehicles of your choice, like TFSA, mutual funds, ETFs, etc. Your policy will have a cash value based on the premiums you put in, and your policy will also have a death benefit as well. The good thing about this approach is that if you play your investments right, you can finish paying off the premiums in like 5 years. The bad thing is that if you don't play your cards right, then you lose a shit tonne of money, just like for regular investment portfolios. How this loss of money affects the policy, I don't know.
Participating Whole Life is when you leave the investing up to the insurance company, and in this case, it's Equitable Life. They have a participating whole life policy that historically paid up to 10% a year, and has been steadily dropping until 6.8% for this year. The returns are not guaranteed. Jack told me since part of the spread of the investment is in bonds, and since the bonds have been dropping til like 1% now, that is a reason for why the dividends declared dropped from 10% to 6.8%. And since bonds can't go negative (unless your country is in deep, deep shit), and since the dividends declared is based off of the companies return on investments, which is in turn partly based on bond performance, the dividends declared should not drop more than 6.8%.
We crunched some numbers for a Male Age 25, Non-Smoker:
Participating Whole Life:
$1200/yr for 20 years
Cash value after 20 years: 28,722
Death Benefit after 20 years: 115,628
Total Paid after 20 years: 24,000
Cash value after 40 years: 103,949
Death Benefit after 40 years: 195,660
Total Paid after 40 years: 24,000 (no change)
Compare this with T-10 (10 year term policy)
T-10
$17/$45/$87/$205 per month per 10 years, starting from age 26,36,46,56.
Cash value after 20 years: 0
Death Benefit after 20 years: 250,000
Total Paid after 20 years: 744
Cash value after 40 years: 0
Death Benefit after 40 years: 250,000
Total Paid after 40 years: 4281
I don't have the numbers for after the age of 85, but I think I remember some policies don't cover past the age of 85, and other policies charge ridic prices of like 1k/month for ppl over the age of 85.
So from initial inspection, you'd pay $20k less for term insurance over 40 years, AND you'd have a bigger death benefit, but you don't get a cash value for your policy, thus you can't use it to borrow from the bank.
And how infinite banking really works is just that you use the cash value of your whole life policy as collateral to borrow from the bank. The bank charges you 4% interest for the loan, but your whole life policy makes 6.8%, thus there is an arbitrage opportunity of sorts, where you'd still gain (or at least break even, assuming that the gain just offsets inflation), even when you get a loan from the bank.
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