life insurance dividends

When it comes to dividends associated with a whole life insurance policy, there are several dividend options available to policyholders. These options allow you to customize how your dividends work for you, and understanding them is key to making the best choice for your financial goals. As owners of a whole life policy with a mutual insurance company, policyholders share in the profits of the company and have the freedom to decide how to use their dividends. The first option is to receive your dividends directly in cash. At the end of the year, mutual insurance companies calculate their profits. Since you’re a policyholder and therefore an owner of the company, you’re entitled to a share of these profits. If you choose this option, the insurance company will issue you a check for your share of the profits. It’s a straightforward way to put cash in your pocket.

The second option is to reduce the premium on your policy. For example, if your annual premium is $1,000 and your dividend is $200, you’ll only need to pay the remaining $800. This method reduces the out-of-pocket cost of maintaining your policy. Both the cash and premium reduction options provide immediate financial relief, which can be appealing for those looking for quick results. The third option involves using dividends to purchase one-year term insurance, which increases your death benefit. While the cost of term insurance rises with age, the additional death benefit remains consistent, providing extra security for your beneficiaries or chosen charity.

Another option is to let your dividends accumulate at interest. Here, dividends are held by the insurance company in a separate account and earn a fixed rate, typically between three and four and a half percent. This allows your dividends to grow without immediate use, providing a layer of steady financial growth. A highly popular option is using dividends to purchase paid-up additions—additional life insurance that increases both the cash value and death benefit of your policy without requiring further premiums. This strategy allows your money to grow and compound uninterrupted. Over time, this creates exponential growth as dividends generate more dividends, which in turn generate even more dividends. It’s a powerful way to build long-term wealth while maintaining liquidity through the policy’s loan provision.

Lastly, if you have taken a loan against your policy, you can use your dividends to pay the loan interest. Any remaining dividends can then be reinvested or applied to purchase paid-up additions, helping you manage debt while still growing your policy’s value. Dividends are essentially a bonus—a return of profit from the insurance company to you. How you utilize them depends on your financial goals and current needs. Whether you prefer immediate cash, long-term growth, or loan management, there’s an option that fits your strategy.

These are the six main dividend options we know of. If you’ve encountered others, feel free to share your insights. Remember, dividends are a powerful tool, and how you use them can make a big difference in achieving your financial objectives.

Visit our website Tier1capital.com to book a free strategy session today! And remember, it’s not how much money you make—it’s how much you keep that truly matters.

We’ve been helping families, business owners, and individuals take control of their finances for years. Today, we’re excited to revisit the foundational principles of the Infinite Banking Concept. Whether you’re managing personal finances, running a business, or planning for the future, this concept provides a powerful tool to achieve financial goals.

So, what is the Infinite Banking Concept, and more importantly, what isn’t it?

First, it’s not about life insurance. A common misconception is that infinite banking revolves around buying life insurance, but it’s actually about controlling the process of financing in your life. Nelson Nash, in his book Becoming Your Own Banker, makes this clear. The core idea is that we finance everything we buy—either by borrowing money and paying interest to someone else, or by paying cash and losing out on the interest we could have earned elsewhere. There’s no free lunch.

Some may claim they have an “infinite banking policy,” but that’s a misnomer. There’s no such thing. While certain policies are designed to implement the Infinite Banking Concept, Nelson discovered this process using a traditional whole life insurance policy he had purchased back in 1958.

Fast forward to the early 1980s: interest rates soared from around 8.5% to over 20%, and Nelson faced massive interest payments—$50,000 to $60,000—on a commercial loan. At first, he was at a loss. He couldn’t afford to both keep the property and make the payments. Selling wasn’t an option, as high interest rates had drastically reduced the property’s value.

Then, a simple piece of mail changed everything. Nelson received a statement for his State Farm life insurance policy. He noticed that for a $389 premium, the cash value of the policy would increase by nearly $1,600. That’s when it hit him: he needed to align his life insurance premiums with his mortgage payment. This would ensure that when mortgage rates spiked, the increase in cash value would help cover the additional cost. This realization marked the genesis of the Infinite Banking Concept.

It’s a story that resonates to this day. Many people remain at the mercy of fluctuating interest rates on mortgages, home equity lines of credit, or business loans. Rates can rise unexpectedly, throwing financial plans into chaos. Nelson’s foresight—creating and controlling a personal pool of money—allowed him to navigate these challenges with confidence.

Initially, Nelson purchased his policy for its death benefit. But over time, the cash value grew, creating a financial resource he could tap into through policy loans. His background as a forester gave him a unique long-term perspective; he thought in terms of decades and generations. He realized that to prevent this issue from recurring, he needed to structure his finances so his life insurance premiums equaled his mortgage payment.

Importantly, this was not a short-term solution. Nelson was investing in a policy that wouldn’t have cash value for two or three years. But his long-term thinking paid off—it literally saved him.

This brings us to the essence of the Infinite Banking Concept: it’s about how you use your money. It starts with foresight—anticipating what you’ll need in the future and ensuring it’s available when you need it. You may not know exactly what challenges or opportunities lie ahead, but planning for the unexpected is critical. When things are going well, that’s great—but what’s your backup plan when the unexpected happens?

At its core, the Infinite Banking Concept is about being in control of the financing process. It starts with building a pool of cash that you fully own and control, offering liquidity and flexibility. Once that’s established, you have options: paying off debt, investing in real estate, remodeling your home, supplementing retirement income, or making a down payment on a new property. With your own pool of money, the possibilities are endless.

But there’s a critical step: playing the honest banker. This means valuing your money the same way a bank values theirs. Whether you’re borrowing from your policy or repaying it, treat it as if you were working with a traditional lender. This ensures you don’t lose the opportunity cost associated with spending your money elsewhere.

The real power of this system lies in its adaptability. Interest rates fluctuate over time. When bank loans were at 2-3%, some chose not to borrow against their policies. But as bank rates climbed to 8-10% while policy loans remained at 5%, those with foresight and a well-structured policy enjoyed the freedom to borrow on more favorable terms.

It’s not about interest rates or returns—it’s about control. Infinite banking allows you to navigate financial challenges and seize opportunities with confidence.

As Nelson envisioned, this process isn’t just for one generation—it’s a tool for creating generational wealth. By educating your children and grandchildren on this concept, you can ensure they continue the legacy. Each generation benefits from the death benefit, using it to build their own pool of cash and pass it along. This creates a self-sustaining system of financial independence.

Importantly, infinite banking doesn’t require lifestyle sacrifices. It’s about making smarter choices with the money you already spend. Instead of relying on external financing, you fund your purchases from your own pool of cash, retaining control and flexibility. This system can go on indefinitely, benefiting you and future generations.

Getting started is simple: start where you are. Begin with a policy that’s comfortable for your current financial situation, and as your cash flow grows, expand your system with additional policies. As Nelson often said, someone will benefit from your foresight—why not make sure it’s you and your family?

Visit our website Tier1capital.com to book a free strategy session today! And remember, it’s not how much money you make—it’s how much you keep that truly matters.

Achieving financial freedom feels more challenging than ever. High interest rates, rising inflation, and the creeping pressure of lifestyle inflation can make the dream seem unattainable. Yet, financial freedom is within reach—it’s not just about how much you earn but how you manage, control, and optimize your money. By understanding and applying a few key principles, you can take control of your finances and experience the true freedom that comes with it.

Financial freedom starts with a feeling—a sense of being unchained from financial stress and constraints. It’s about living life on your terms without being held back by outdated systems or rigid financial strategies. At Tier 1 Capital, we believe the path to financial freedom begins with control. By taking control of your money and making it as efficient as possible, you can build a pool of cash that is fully liquid and accessible when life throws you opportunities or challenges.

One common roadblock we see is the traditional approach to saving. Many people segment their money into “buckets,” with specific funds for retirement, emergencies, and education. While this might seem like a sound strategy, it often leads to inefficiencies and limitations. What happens when an emergency arises, but your emergency fund falls short? Do you tap into retirement savings or your child’s college fund? These decisions come with penalties, taxes, and financial stress. Worse, earmarking money in accounts with restrictions often leaves you with no other option but to rely on credit cards or loans to bridge the gap, creating a cycle of frustration and debt.

We’ve seen this play out time and again. Consider a doctor we met years ago. Despite earning over $850,000 annually and having $1.5 million in his retirement accounts, he didn’t feel financially free. Why? His money was locked away in accounts he couldn’t access without penalties. When he wanted to take his family of six on a Disney vacation, he had no liquid savings and was forced to use a credit card with 18% interest. On paper, he was wealthy, but in practice, he was trapped. This situation is a perfect example of what happens when you give up control of your money.

The first step to financial freedom is to stop giving up control. Traditional advice tells you to lock money away in retirement accounts, 529 plans, or other restrictive savings vehicles. While these accounts have their place, they can limit your ability to respond to life’s needs or opportunities. Instead, focus on saving your money in a way that gives you liquidity, use, and control. This shift allows you to address emergencies, take advantage of opportunities, and maintain financial stability without compromising your long-term goals.

Another critical step is auditing your cash flow. Take an honest look at where your money is going. Are there inefficiencies? Are you unknowingly transferring wealth away from yourself? Often, the problem isn’t that you don’t earn enough—it’s that your money isn’t working as efficiently as it could. By identifying these leaks, you can redirect your cash flow and make it work harder for you.

Ultimately, financial freedom comes down to access. Having money isn’t enough if you can’t use it when you need it. Every purchase you make is either financed by paying interest to someone else or by giving up the potential interest your savings could earn. Instead of falling into this trap, consider borrowing against your savings and paying interest back to an entity you own and control. This approach keeps your money working for you while giving you the flexibility to manage life’s needs on your terms.

When you regain control of your financial system, you take ownership of your future. You determine the terms of repayment and ensure your money remains accessible and working for you. This control is the essence of financial freedom. It’s not about the size of your income or the balance in your retirement account—it’s about having the liquidity, use, and control to live life on your terms.

At Tier 1 Capital, we always say, “Control equals freedom.” When you control your cash flow, you unlock the ability to take advantage of opportunities and weather life’s challenges with confidence. If you’re ready to take the first step toward financial freedom, visit us at tier1capital.com. Remember, it’s not how much money you make—it’s how much money you keep and control that truly matters.

You may or may not realize that you’re able to insure not only your own life, but also the lives of others, under certain conditions. And that’s exactly what we’re going to talk about today—how to buy a policy on someone else’s life.

Now, in most cases, when you purchase a life insurance policy, you’re both the owner and the insured. This means your own life is covered, so the death benefit will be paid out when you pass away. As the owner, you control everything: you pay the premiums, can change the beneficiary, and access benefits like the cash value. But sometimes, it might make sense to purchase a policy on someone else’s life, especially if you’re uninsurable or would suffer a financial loss if that person dies. In that case, you’d be the owner of the policy and have access to those benefits, including the cash value.

Think of it this way: maybe you want a life insurance policy but aren’t insurable yourself. That’s where the insurance industry provides the option to purchase a policy on anyone with whom you have an insurable interest. So, what is an insurable interest? Basically, it means you would suffer some financial loss if that person passes away.

Let’s talk about who might qualify as someone with an insurable interest. This could include your spouse, your child, a co-signer on a loan where you’d be responsible for paying the loan if they die, a parent you rely on financially, or even a business partner. There are other options as well, like a key person in your company or a partner in a real estate venture. We’ve even worked with people who co-own assets like an airplane together. In that case, if something were to happen to one partner, the other partner would want to ensure the deceased partner’s share of the asset was taken care of, so they purchase insurance on each other.

Even if you have a roommate who helps with expenses, their passing could create a financial loss for you. But regardless of the situation, when you want to purchase life insurance on someone else’s life, the agent will need to explain to the insurance company what the financial loss would be if that person dies. Once this is established, the underwriting process is quite similar to a standard policy. The majority of underwriting will be based on the insured person’s life, as the insurance company is assessing their risk. So, the insured person would need to complete the application, possibly undergo a physical if required, release medical records to the insurer, and sign the necessary delivery documents. But from there, it’s straightforward—the policy then lies entirely in the owner’s hands.

Here’s a key point to remember: the insurable interest only has to exist at the time of application. For example, if two business partners apply for insurance on each other, and later down the road they sell the business, they can still keep those policies because the insurable interest was verified only at the time of application. This is a big contrast with property insurance, where the insurable interest must exist throughout the policy.

At the time of delivery, the insured signs off on the policy, giving the owner complete control. The owner will have that control throughout the insured’s life and, ultimately, the death benefit will be paid to the owner or to a beneficiary designated by the owner.

This approach can also be a solution if you’re uninsurable and want to implement the infinite banking concept. Simply find someone with whom you have an insurable interest, purchase a policy on them, and you’ll control the cash value. Then you can borrow against it and take advantage of all the benefits that infinite banking provides.

It’s interesting to note that when people are considering buying policies on others, they often think about insuring the youngest person possible to gain the longest growth period. However, if you’re looking for liquidity in the near term, you might want to think about insuring someone closer to your own age, or even older, if budget allows. When that person eventually passes, you’ll receive a guaranteed sum of money, along with access to the cash value in the meantime.

If you’d like to learn more about this strategy and how it could work in your life, visit our website at tier1capital.com to schedule a free strategy session or download our free business owners guide. We’d be happy to discuss your unique situation and help you make the most of it.

Remember, it’s not about how much money you make—it’s about how much you keep that truly matters.

In America, we tend to view our financial lives in terms of “money in, money out.” You go to work, earn money, and then use that income to pay bills. It’s a cycle most people are familiar with. However, when we’re taught about finances, the focus is often on the rate of return—how much interest can be earned on savings or investments. But here’s the problem: if your cash flow is inefficient, there won’t be anything left to save.

That’s what we’re discussing today—the difference between cash flow and rate of return, and why optimizing your cash flow might be the most important financial move you can make. At Tier 1 Capital, we’ve dedicated ourselves to helping people regain control of their money, and our approach focuses on cash flow, not just rate of return.

Here’s the simple truth: you can’t spend rate of return. Cash flow, on the other hand, is the lifeblood of both your family and your business. When you focus on cash flow—and more importantly, maintaining control over it—you gain clarity and confidence in your financial decisions. Rate of return is unpredictable and often involves locking up your money, making it inaccessible when you need it most. But when you focus on cash flow, suddenly, a world of possibilities opens up.

One of the biggest areas where we help families and businesses is by analyzing their current cash flow. Many people have inefficiencies in their financial systems—money leaks, so to speak. These are like holes in a bucket where cash slips through your hands each month without you even realizing it. Our goal is to plug those leaks, even if it’s just a small amount at a time, so your money stays in your control.

Think of it this way: when you plug the holes, less money leaks out. Now, that money remains with you, building up over time and becoming available for future purchases or investments. The key is to make that money work for you, not for financial institutions, advisors, or large corporations.

We all know the importance of saving, right? No matter how much you’re saving—whether it’s 5%, 10%, or 20%—there’s always a sense that you should be saving more. And that’s even harder today with rising inflation and interest rates. So how do you maintain a manageable cash flow while still saving for the future? By identifying inefficiencies in your current system and redirecting that money to a place where you have liquidity, use, and control over it.

Once you start building up a pool of cash, you gain options. You won’t need to rely on high-interest credit cards (which can have rates of 30% or more!) or take out loans with unfavorable terms. You’ll have something in your back pocket—a financial safety net that you’ve built and can leverage when needed.

At Tier 1 Capital, we recommend placing that money into specially designed life insurance policies, structured for cash accumulation. Why? Because not only does your money continue to grow with compound interest, but you can also borrow against the policy at much lower rates—currently around 5.5% to 6%. Compare that to today’s mortgage rates, which are often over 7%, or even home equity lines of credit that can go up to 9.5%.

The real advantage of these policies? They offer flexible, unstructured loan repayments. When you take a policy loan, there’s no strict repayment schedule. Yes, you should pay back the interest annually, but beyond that, you get to decide how and when you repay the loan. If you’re used to paying a fixed amount to a credit card company each month, you can now direct those payments toward your policy loan—and if you have extra cash flow, you can repay it faster. The faster you pay it back, the quicker you can borrow against it again.

This structure allows you to stay in control of your cash flow on multiple levels, making your money work for you in the most efficient way possible.

If you’re interested in learning more about how this process can work for you, your family, or your business, visit our website at tier1capital.com, where we offer a free web course on cash flow management.

Remember, it’s not about how much money you make—it’s about how much you keep. And that’s what truly matters.

When you’re talking about whole life insurance with a mutually owned life insurance company, it’s natural that you’ll talk about dividends, and you may be wondering, what exactly is a dividend and how do life insurance dividends differ from investment dividends? And that’s exactly what we’re going to cover today.

Now, there are some key distinctions between life insurance dividends and investment dividends. What exactly are they? So an investment dividend is literally a distribution of profits from the company to its shareholders, and those dividends are taxable. Those distributions are taxable. Now, a dividend in life insurance is literally a return of overpaid premium, and as such is not taxable. So that is a key huge distinction, right? And that’s why we always talk about paying taxes, income tax on the premiums. You never want to take a deduction for your life insurance premium, even if you’re using it for business purposes, because that would mess everything up in the sense that if you take the deduction on the premium payments, then your death benefit, that big pool of money that’s going to go to the beneficiary, will end up being taxable. So it’s important to make sure that all your ducks are in a line all along the way to make sure you’re getting the most bang for your buck when it comes to the benefits of life insurance.

You know, and that brings up a good point. The premium is the small contributions you make to get the huge death benefit. So if the premium is deductible, the death benefit is taxable. You don’t want that. So by paying the premium with after-tax dollars, that allows for the tax advantages of the large amount, the death benefit. But let’s get back to dividends. Why are dividends important? Well, real simply, dividends in life insurance enhance your cash value growth. Now again, the dividends are a refund of overpaid premiums. But think of it this way, that refund is technically a profit. And understand that if you buy a policy with a mutual insurance company, you are the owner of the company as it relates to your policy.

And think about it this way: with the whole life insurance policy, there are actuaries that design and engineer these policies, right? And we all know that engineers overestimate, and that’s why we have the dividends built in, right? So when you see an illustration, you’ll see those guaranteed numbers—the worst-case scenario. As in, if there were no dividends paid to that policy ever, this is what you would have—the worst case, correct? And then there’s another illustration in there, and that’s usually based on the current dividend rate. What would happen if we earned the 2024 dividends or 2025 dividends every single year perpetually going forward? How would the policy perform?

And I think another thing we need to touch on here is it makes the most sense to have those dividends reinvested into the policy using paid purchasing, paid-up additions, right? So with that, the dividends go and purchase a small chunk of death benefit that’s not going to have any more ongoing premiums. And so you’re able to earn interest on those dividends that you’ve earned, and it increases your dividends going forward, right? So think of it—you’re earning interest on your dividends and dividends on your dividends. And this thing just continues to snowball and really build long-term value. And that’s the key. Remember we said you’re the owner of the company as it relates to your policy. Well, those profits are smaller in the beginning, in the early years, and much larger in the later years. So the longer you have the policy, the more dividends you’ll receive, the greater those dividends will be, and the greater the compounding.

And that makes perfect sense when you think about the design of a life insurance policy, right? Because when you purchase a whole life insurance policy, the insurance company is making you two promises. The first is to pay that death benefit out if and when the insured dies anywhere along the way, and the second is to have a cash value equal to that death benefit at the age of maturity, which is typically age 121. But that’s really key. They’re actually designed to increase in cash value on an exponential basis, on a guaranteed basis, even over time as that policy matures. So if you add dividends on top of that, it makes it go even faster and faster and makes this machine as efficient as possible, especially as that policy ages.

Exactly. But now let’s talk about one key feature of dividends, and it’s real simple: they are not guaranteed. Dividends are not guaranteed. So keep this in mind. That’s why when you get your illustration, there’s two columns: there’s the guaranteed numbers with no dividends, and then the current numbers, which include dividends at the current rate the insurance company is paying out. Dividends. Now two things need to be addressed. Number one, the guarantees are the worst-case scenario. And number two, the numbers you see on the non-guaranteed with dividends is guaranteed to not be that number. It’s funny. So you get these two illustrations, and you know you have the worst-case scenario, you have the current-case scenario. Neither of them are going to be true. They’re just meant to give you an idea of what those cash values could look like over time. But another key we need to remember here is that the only dividends that aren’t guaranteed are the ones that haven’t been credited yet. Once your policy earns a dividend, there’s no risk of losing that dividend, that cash value, that death benefit associated with those paid-up additions. There’s no risk associated with it from the market, even if, you know, the insurance company never pays another dividend again. The dividends that you’ve already earned are yours, and you get to keep those.

So understand a few things here. Number one, dividends are not guaranteed. But if you’re buying a policy with a mutual insurance company, most mutual insurance companies have been around for over 150 years or so, paid dividends for over 125 consecutive years—that’s through world wars, depressions, gas shortages, you name it. So those dividends, again, aren’t guaranteed, but the probability is the company will pay something. It may not be what they’re projecting, but they will pay something. And the other thing is that as the owner of the policy, you get to choose how your dividend is allocated. You can use it to reduce premiums, you can use it to be paid in cash, you can use it to purchase paid-up additions or paid-up life insurance. So there’s a lot of different ways you can allocate your dividend, and that’s your contractual right.

Now, when we talk about whole life insurance designed for cash value accumulation, dividends are a key feature. Thanks so much for watching our video, and remember, it’s not how much money you make, it’s how much money you keep that really matters. We’ll see you in the next one.

When discussing whole life insurance with a mutually owned life insurance company, dividends naturally come into the conversation. You might wonder, what exactly is a dividend and how do life insurance dividends differ from investment dividends? That’s exactly what we are going to cover today.

There are some key distinctions between life insurance dividends and investment dividends. An investment dividend is a distribution of profits from a company to its shareholders, and these dividends are taxable. However, life insurance dividends are a return of overpaid premiums and are not taxable. This is a crucial distinction.

One reason we always talk about paying income tax on the premiums is that you never want to take a deduction for your life insurance premium, even if it is for business purposes. Doing so could lead to your death benefit—the large sum of money that goes to the beneficiary—becoming taxable. It’s vital to ensure that everything is aligned properly to get the most out of life insurance.

The premiums you pay are small contributions towards the huge death benefit. If the premiums are deductible, the death benefit becomes taxable, and you don’t want that. By paying premiums with after-tax dollars, you maintain the tax advantages of the death benefit. Dividends, on the other hand, are used to enhance your policy’s cash value growth. Although dividends are technically a refund of overpaid premiums, they can be seen as profits because if you have a policy with a mutual insurance company, you essentially become an owner of the company.

With whole life insurance, policies are designed by actuaries, who typically overestimate the amount needed, which is why dividends are built into the policy. When you see an illustration, you’ll notice two sets of numbers—the guaranteed figures representing the worst-case scenario (if no dividends were ever paid) and another set based on the current dividend rate, showing how the policy could perform if dividends are paid consistently over time.

Reinvesting dividends into the policy by purchasing paid-up additions is a smart strategy. This allows you to earn interest on the dividends, which in turn increases future dividends. Over time, this compounding effect builds long-term value, with dividends being smaller in the early years and much larger in the later years.

Life insurance companies make two promises with a whole life policy. First, to pay out the death benefit when the insured dies, and second, to have the cash value equal to the death benefit by the policy’s maturity, which is usually age 121. As the policy matures, the cash value grows exponentially. If you add dividends into the mix, this process accelerates, making the policy more efficient over time.

One key thing to remember is that dividends are not guaranteed. When you get your policy illustration, the figures showing the dividends are based on the current rate, which is subject to change. However, once a dividend is earned, it’s yours—there is no risk of losing that dividend or the associated cash value, even if no future dividends are paid.

Although dividends aren’t guaranteed, many mutual insurance companies have been paying dividends for over 125 consecutive years, even through significant events like world wars, depressions, and economic downturns. While the dividend projections may not always be met, companies generally do pay something.

As the owner of the policy, you have the contractual right to choose how your dividends are allocated. You can use them to reduce premiums, take them as cash, or purchase paid-up additions.

If you’d like to learn more about how to apply this process to your business, family, or personal finances, visit our website at tier1capital.com. We’d love to speak with you in a free strategy session.

Remember, it’s not how much money you make; it’s how much money you keep that really matters.