Borrowing Without Begging: Financing Alternatives Through Whole Life Insurance

By Pamela Yellen

By Pamela Yellen

Did you know you can use life insurance to borrow money from yourself for cars, college, vacation or other major purchases even when banks won’t give you a loan?

Walt Disney did it. So did J.C. Penney and the Pampered Chef. They all used the Bank On Yourself method to start, grow and/or finance their businesses.

Walt Disney borrowed from his life insurance in 1953 to help fund Disneyland, his first theme park, when no banker would lend him the money.

Following the 1929 stock market crash, J.C. Penney borrowed from his life insurance policies to help meet the company payroll. Had he not had ready access to capital, the company probably would have been forced to close its doors.

In 2002, Doris Christopher sold her kitchen tool company, the Pampered Chef, to Warren Buffett for a reported $900 million. Seven years earlier, she launched the company with a life insurance policy loan.

So-called “permanent” or cash value life insurance (versus term insurance, which is like renting insurance) builds cash value. Policy owners can use this to finance major purchases such as cars and college tuition, repaying themselves interest that they otherwise would have paid to lenders. In difficult times, these policies can provide a ready source of money to cover personal or business expenses.

Bank On Yourself-type policies are dividend-paying whole life policies that incorporate little-known riders or options that turbo-charge the growth of the cash value in the policy, especially in the early years of the policy.  A properly designed policy could have up to 40 times more cash value in the first years than a traditionally designed whole life policy.

While access to credit and capital remains tight for both businesses and consumers, those who use Bank On Yourself have been able to have access to the money in their plans by answering just one question: How much do you want?

When it comes down to it, you finance everything you buy. You either pay interest to someone else when you use their money; or you use your own and give up the interest and investment income you could have earned, had you kept your money invested instead.

But Bank On Yourself is a different way of managing your money – one that beats financing, leasing or even paying cash. Here are seven reasons why:

  1. You can access your equity in the policy any time you want and for any reason you want.
  2. No nosy credit applications are required. You don’t have to beg for money or pledge your first born to get it.
  3. You can pay back your loan on your own schedule, not someone else’s.
  4. If you hit a tight spot, you can reduce or skip some payments, and no collection agencies will call, no goon squad will come to repossess your stuff or foreclose on your house, and you won’t get a black mark on your credit report.
  5. While you do pay interest on policy loans (at a rate that’s often less than rates available from financial institutions), the interest you pay ultimately ends up back in your policy.
  6. If your policy is issued by one of the handful of companies that meets all the necessary requirements, when you take a policy loan, your policy can continue growing as though you hadn’t touched a penny of it. You’ll continue to earn the same pre-set and guaranteed cash value increase every year and receive the same dividends as if you had no loans against your policy. Although dividends aren’t guaranteed, Bank On Yourself Authorized Advisors use companies that have paid dividends every year for over 100 years – including during the Great Depression.
  7. Policy loans are not taxable as long as the policy remains in force

Term Life vs. Bank On Yourself: Critical difference

With all the advantages I have listed, why is it that 99 out of 100 financial “gurus” insist that whole life insurance is a lousy place to put your money?  Most will recommend you buy term life insurance instead and invest the difference in mutual funds.

That’s in spite of the fact that those who invested in the S&P 500 index fund for the past decade saw their nest eggs shredded by almost 25 percent – not even counting the 29 percent inflation during this period.

The fact is, most financial experts know nothing about the specially designed type of dividend-paying whole life policy used for the Bank On Yourself method. Out of 1,500 major life insurance companies, only a handful offer policies with all the features required to maximize the power of this concept.

And the fact is, an advisor who helps a client implement a Bank On Yourself-designed policy takes a 50-70 percent cut in commission. That could be another reason most people have not heard of it. With so many Americans needing a secure way to build savings after losing so much in the stock market, that’s a shame.

Here are some of the key differences between the type of policies used in the Bank On Yourself method and typical whole life policies:

  • High Growth – A complaint about whole life is that the money you have access to in the plan (cash value) grows too slowly and typically there is no cash value at all in the first three years. A Bank On Yourself policy, however, incorporates a special rider or option that puts the growth money in the policy on legal steroids. This means policyholders have significantly more equity, especially in the early years of the policy, allowing them to use it as a financial management tool from the start.
  • Compounding Dividends – Most financial experts are familiar with whole life policies in which the death benefit stays level for the life of the policy. However, in a dividend-paying whole life policy, dividends can be left in the policy to purchase additional coverage, while at the same time growing cash value in the most efficient way possible.
  • Higher benefits — Another misconception is that when the owner of a whole life policy dies, the insurance company pays only the death benefit and keeps your cash value. Bank On Yourself policies are very different.

Each person’s financial situation is different, and results vary according to many factors. But with all the features built into today’s Bank On Yourself plans, Americans have a safe and secure alternative to risky investments and the huge losses they experienced in 2008 and earlier recessions and crashes.

Out of the hundreds of thousands of people who use the Bank On Yourself method, not one lost a penny in their plans when the markets crashed. Their plans have all continued growing safely and predictably, just as they have for more than 100 years, even during the Great Depression. Walt Disney and J.C. Penney were right!

About Pamela Yellen: As a consultant to financial advisors, Pamela Yellen investigated more than 450 savings and retirement planning strategies seeking an alternative to the risk and volatility of stocks and other investments. Her research led her to a time-tested, predictable method of growing and protecting savings now used by more than 500,000 Americans. Pamela’s book, BANK ON YOURSELF: The Life-Changing Secret to Growing and Protecting Your Financial Future, is a New York Times Bestseller. She has been featured on ABC, NBC, CBS, CNN, FOX, NPR and in The Huffington Post, Fortune Small Business and hundreds of other publications. Learn more at

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