So you’re thinking about getting an Infinite Banking Concept Policy and you’re wondering, “Should I include a disability waiver of premium or not?” If that sounds like you, stick around to the end of this blog post because today we’re going to cover top to bottom why a disability waiver of premium may make sense for your situation.
A lot of times when agents are designing an IBC policy, they’re solely focused on the rate of return. So they don’t end up including any riders that have a cost to them, like the disability waiver of premium.
But keep in mind for sure, having disability waiver of premium will reduce the rate of return. And depending on the company you’re using, they may only charge the rider on the base policy, so the cost is going to be negligible. And again, depending on your situation, it may be well worth having that extra protection in case something happens to you. For example, you get sick or injured and cannot work, therefore you have no money coming in. And then the question becomes, how are you going to pay for the policy?
So, let’s take a step backward. What exactly is the disability waiver of premium rider and what does it do and why would you want it? Well, the disability waiver of premium rider is a rider on the policy that has a small cost that ensures your premium gets paid even if you’re not paying it yourself. So if you become disabled and unable to work, the insurance company is going to cover the cost of your premiums. And depending on the company you go with, they may cover the costs of the premiums for the base policy and any riders included on that policy.
So we think if that’s the situation, it may very well be an advantage for you to include that rider primarily if you’re the main breadwinner in your family or you’re a dual-income family and you’re depending on your income for lifestyle and savings.
So think about it, right now you’re designing your IBC policy and you have certain goals in mind of how you want to use that policy. Why would those goals change if you become disabled? Just because you’re not working doesn’t mean that your financial goals are going to change. Keep this in mind: you can always take the rider off of the policy. However, if your policy isn’t issued with the disability waiver of premium, you can’t go back and add it on later. So, it’s something you should really put some thought and consideration into, especially if you’re a younger person, let’s say, under age 50.
So now let’s take a look at what happens if you get disabled, you’re unable to work, and you did not have the disability waiver of premium rider on your policy. So, if you don’t have the rider, the first thing you have to ask yourself is: is there enough cash in your policy to keep the policy going if you can’t make the premium payments? Another question you have to ask is: how are you going to make those premium payments? And the third question would be, again, if you’re disabled and you didn’t have the rider, how is the policy going to continue and how are you going to use and/or access the money in your policy going forward if there are no premiums going in?
Think about this, if you have an IBC policy properly designed with the waiver of premium rider and you become disabled, and hey, maybe your financial goals have changed, maybe your new financial goal is to maintain your lifestyle and your financial security, which is a great goal. This properly designed policy will allow you to do it. You’ll have complete liquidity use and control of that cash value with no questions asked, which is very important at this time of your life, because let’s face it, you have no proof of income. Traditional means of accessing money from a bank or credit card are now going to be difficult because you have no source of income and the premiums are being covered by the insurance company. Imagine the peace of mind that comes with that.
So keep in mind having the rider on a policy protects not only your income, but also think about it, the policy has a death benefit and the reason you’re setting it up is to be in control of your finances and to be in control of your money. Why should those goals change if you become disabled and you have actually less money coming in? And as we mentioned earlier, the cost of the rider is generally negligible. It’s a very small amount. And more importantly, insurance is a transfer of risk to begin with. So you’re transferring the death benefit risk. But more importantly, now you could transfer the disability risk all for a negligible cost. So it may be beneficial to you to include that rider in the policy design, especially if the cost is very small.
Although, IBC policies are designed for maximum cash accumulation, so you maintain full liquidity use and control of your money throughout your financial journey at the end of the day. We do use a life insurance policy to accomplish that.
If you’d like to talk about whether the disability waiver of premium makes sense for your situation, be sure to check out our website at Tier1Capital.com to get started today. If you’d like to learn more about our process, click on our website to watch our free web course the Four Steps to Financial Freedom.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.