154. ​​Infinite Banking Policy Design: Beware of The 10/90 Policy

Becoming your own banker there is the tool that is being used. It's a participating whole life insurance policy. And that's just a tool. I mean, if the tool was your, you know, the back of your toilet seat or under your mattress, that worked very well. That would be the tool that we use. But it doesn't take away from the process of becoming your own banker. And just from our experience in terms of the amount of policies and clients that we see on a day to day basis, we're structuring together all of the factors that align to the independent individual building their own banking system, decentralized away from that banking system that is built from the centralized banks so that they can store their capital in.

So just how exactly do you design one of these whole life policies for the purposes of infinite banking? You know, do we, do we need to have a certain magical number of a percentage for how big the base premium is or the paid up additions premium is? Or is there some magic bullet kind of like, you know, they talk about the, you know, jfk, he, I don't know if anyone knows, but you know, he got assassinated a long time ago and there was this whole magic bullet theory about how it all took place where bullets are ricocheting off shoulder blades and taking people out left, right and center. Is there some kind of a magic bullet that, that the infinite banking practitioner uses to maximize plan design for every single person? Well, we're here to kind of dispel some of those myths a little bit and give some opinions and perspective on it. I'm joined today of course by my good friend Henry Wong. He's a regular contributor on the Wealth About Bay street podcast today. And we've been having a lot of conversations and a lot of questions that have been coming up from people in Canada. And of course, really we see questions from all over the map, specifically around a certain style or type of design that is becoming, for whatever reason seems to becoming more popular but like engaging, like more people are talking about it. And that's the idea of a 1090 or a 9010 because nobody seems to know which, how to flip the percentages around. So we're going to talk a little bit about that. We're going to dispel, I think, a few myths on it and talk about some of the thought process that goes into what, what a practitioner is looking at when they, when they think about plan design and engaging someone for the purposes of infinite banking so that they can maximize their utilization of a policy at their terms over the bulk of their lifespan and then potentially the lifespan of another person, regardless of who that policy's on. So that was a mouthful. Henry, I'm excited to be with you here today to talk about this and I think there's a lot that we're going to try and unpack and, you know, so let's just, let's just kick it off and have some fun. So, you know, where do we want to begin when we think about, you know, what are some takeaways we want people to have by the time we're done this particular interview.

Yeah, my pleasure, Richard. I really enjoy being on this podcast and I wanted to just help also share that these are a lot of the questions that we deal with when people who are interested in setting up their own family banking system. One of the most common questions I'll get asked is when I walk through their policy designs. The question's about.

Why is the premium this percentage and this portion of the premium this percentage. And so it is about raising the concerns on our views and risks of a very widely marketed policy design of that 9uten policy design. And in other words, kind of what I see in substance overstuffing money into a whole life insurance contract, hoping for it to do something in a very particular way and what that in substance looks like, especially in the early few years and people who aren't familiar with it. Maybe Richard, you can help explain what that 9010 or 1090 policy design means. But I know, Richard, you have done a really good video explaining the mechanics and the structures of premiums and making sense of paid up additions. So maybe if you can just elaborate a little bit on that 1090 what that means.

Yeah, so the general premise is that you have a policy that allows you to put as little amount of what we would refer to as base premium into the policy. So base premium from my vantage point would be the minimum contract required premium to maintain the whole life part of the contract and then any rider. So you may have different riders like a term rider, etc. In fact, in many of the 1090 type style contracts, you almost can't build them or it's most likely impossible to build them if you don't have some additional term rider in there. That's that that's allowing for additional capital to go into the policy. And the result of that is, is that you have. So you know, if you had a $10,000 policy, let's say it was your annual premium or $1,000 or 10% would be the minimum required and then $9,000 would be the flexible premium or the paid up additions premium. And so we're going to talk through some of the fundamentals of how that could create several potential problems and pitfalls for the policy owner at various different stages as they move forward in time with that contract. And, you know, I'll preview kind of one of them right here and we'll get to that. I think we'll discuss a little bit more. But the ability to, you know, so when it comes to these policies, you want to have the ability to always contractually be able to pay a premium and you want to have the contractual authority basically to do that. So you don't ever want to have the contractual authority taken away from you where you no longer have the ability to pay a premium. Because if you go to Nelson's book on page 85 on point number two, he says, if you knew at passive income time, you would be getting back every single dollar you put into a system, why would you object to putting more money into it? In other words, we always want to have the ability to pay a premium. Now you might want to have the option, the option to not pay a premium, which is okay, that is perfectly fine and far and wide. Almost all the contracts that we build for people will provide that option. However, you don't want to have your contractual ability taken away. And so that is one of the fundamental risks that can happen in the design overall of something that's a, that's a 1090 structure. So we'll, we'll kind of unpack that a little bit more as we go. But that's the fundamental basis of what we're talking about. And so there's many ways to build a, build a policy. And depending on ages, these things can shift and change. And of course depending on Life company and then depending on countries. So the pursuit of our example, we're going to focus more on the Canadian marketplace. But you know, in general, I know that there's some, some similar issues that, you know, south of the border, I guess, for us that, you know, many of our colleagues have identified as well. So it is something that does need to be managed and mindful and we need to get focused on the core as the client and the infinite banking advisor who's helping that client out. And you get focused on the core of what it is that we're doing. Why do we want to become our own banker in the first place? And how does a certain policy really fit your specific scenario? Because there's many moving pieces in everyone's financial life and it's Very rare, Henry, that I've met two different families or two different businesses where they're virtually set up like twins. Like they might as well been born in the same womb. And they've ran their financial life completely the same and they got the same assets and they make the same income and they have the same 2.4 children, et cetera. Like, it just doesn't, it just doesn't happen that way. So you have a unique set of financial circumstances that are running through your life. That's the thing that needs to help inform the design of a plan that's going to be a fit for the utilization of this concept. And as you go, you will probably add onto it and build on some more. But you have to start someplace. And so, you know, often that first plan design is where the most of that energy and effort and education goes in. And then that plan informs how you might build on another piece to your system as you go over time.

Yeah. And you know, I would just dive into saying when it comes to this whole process, what is probably underappreciated is actually giving credit to the pioneer of the concept, R. Nelson Nash. And you know, for myself, I didn't get the fortunate privilege that you, Jason and Sarblo as an example, got to meet Nelson and learn from him, but at least I get to be very close to that, being able to be a colleague of yours and learn from that. So when we're talking about learning, becoming your own banker, the person who's pioneered the concept, who's, who was spreading the message, that's the first place that I would anchor or align myself with in terms of learning about this concept. How can I become my own banker even further, no better than the people who are closest in proximity to that message. The second part then, now is yes, becoming your own banker. There is the tool that is being used. It's a participating whole life insurance policy. And that's just a tool. I mean, if the tool was your, you know, the back of your toilet seat or under your mattress, that worked very well, that would be the tool that we use. But it doesn't take away from the process of becoming your own banker. And just from our experience, in terms of the amount of policies and clients that we see on a day to day basis, we're structuring together all of the factors that align to the independent individual building their own banking system, decentralized away from that banking system that is built from the centralized banks so that they can store their capital in. And again, that's one of the and one of the main places we look at in terms of building that storage of warehouse of wealth that you are putting your money into, we place it on, you know, just as a warehouse has to be placed on land, we want to place it strategically aligned on land that we co own and most of the time where we can our priorities, placing that building, that warehouse on top of land that we co own which would be with a mutual insurance company. So that's at least the first parameter I wanted to highlight and share when it comes to talking about designing of a policy. Not even going into the mechanics and numbers, just strategic alignment where it needs to be placed. You know, real estate investors talk about location, location, location. Well, this part is that location.

Yeah, I love the analogy that you use there. I think you know, especially the real estate folks that listen to the podcast will really gravitate to that. But I want to piggyback on that a little bit. And so we're talking about like a hierarchy of kind of decision making that, that goes on to the, the kind of some of the plan design aspects and there's many of them and every advisor will have their own little, you know, maybe flair that they might put on that. But the idea of we want to work with a mutual company does go near the very top of the list. It's or if not at the very top and that doesn't mean exclusively that that is the only way to do things. That's not the case. And and we have other videos and, and podcasts that we've talked about where there is a fundamental difference between the US and Canada and that is on population size. And ergo by population size we also have a fundamental difference in the amount of insurance companies we had to work with. Like there's a pretty vast, hey, we got a whack company south of the border. We've got a couple of companies here in Canada. So there is less quote unquote choice. I actually think that, you know, from my perspective that actually makes it easier for us and simpler for Canadians to some degree and simpler is often better. But as far as mutual goes, there's really only one that kind of sits on top of the top of the list. And you know, our podcast is about naming names of insurance companies. Like that's a one on one conversation with people. But it doesn't mean exclusively we do policies there sometimes there's many other reasons to do a policy with another company. Sometimes because of insurability or you know, we're converting a term rider or someone didn't get couldn't get covered by company, the mutual company. And so we have to look at an alternative. Right? There's many reasons why we need to have other companies available. Fundamentally those policies still work in broad scopes for what we're looking for. But there's always going to be a slight change up or adjustment maybe between some features and benefits. When I say features and benefits, really what I'm talking about is usability. So going down that hierarchy we have, okay, mutual company, it's kind of sits at the top of the list. The next thing that kind of comes on the list has to do with functionality. So it's kind of like okay, you can have a Swiss army knife and you know they have like the standard one that only has like clippers and it's got a knife and it's got like a corkscrew, it's got some basic tools or you can get like the Mac Daddy, you know, Swiss army knife and it's got like a spoon and a fork and all kinds of other things that can fold out that you can use making it. The first one is a multi tool but the second one is a far greater, more effective multi tool because it has more options on it, if that makes any sense. So it's kind of like when you buy a car and you can customize the little bells and whistles and options that you put in a car. Same premise. Well, when we're talking about life company structures and the usage from the policy owner's perspective, not from the advisor's perspective, I'm the policy owner. How easy is it for me to take a policy loan? How easy is it for me to put the money back in? How easy is it for me to see my information, see my paid up additions, deal with transactional aspects of becoming my own banker and what's the service level like? So these are things that fundamentally go directly to your day to day operational life. And if you can do online banking with company A bank, bank A and it's really easy and then you can do online banking with company B and it really sucks. Like they have this horrible app and it never works and this doesn't like you're obviously going to want to move your bank accounts to company A because it's easier to do business with. So those are functionality pieces that go in that, that ranking hierarchy list of features that an advisor would be coaching people on and help people understand that utilization component of the money that you're putting in a policy policy, loans, returning money, et cetera. Those are so Fundamentally critical to the usage of a policy. Now, that has nothing to do with 1090, but it does have to do with policy design. So we want to, we want to unpack a little bit with this 1090 stuff, but we want to return our focus to what's actually important, which is you as the policy owner and your ability to become your own banker. Nothing should interfere with your ability, or where possible, very little should interfere with your ability to become your own banker.

Yeah, absolutely. And I just wanted to also jump in, using your analogy with cars or vehicles as the example. What is often not maybe understood is what we see from being an IBC practitioner from the Nelson Nash Institute. We have these considerations of actually knowing insurance exemptions, taxation exemptions of the insurance policies. So when people just say on a broad stroke of I have a life insurance policy, that's very similar saying I'm driving a car. There's a lot of flexibilities in you owning a car. Whether you have a Prius or a 335i, they are both cars. Not everyone is driving a 335i with two doors versus a Prius because it's all based on how it's designed and it appeals to different people. And whole life insurance policies are very similar. You have a different age, whether you are 60 versus you are 20. You have different needs, you have different capital availability, and you also have different health risks that come with when you are designing the policy. And when that policy is designed, it's going to accomplish objectives. And Richard, you were just talking about the usability. We want to design policies in a way that encourages the usability. If you deposit your funds into a policy and you can only access it one year later, that doesn't encourage you to become your own banker. But if you can deposit money into your policy and you can access money immediately, that is going to encourage you to become your own banker. So that we have that encourageability aspect and we have the definition of it. And going more specifically on that definition, we talk about, well, when we're designing the cars, well, what if you, like, you drive a car and then suddenly you decide to cut two wheels off. Now the representation of what a car is is not there anymore. It's a motorbike, right. As an example, or maybe you add a big tank behind it and it becomes a truck. And now that's like a storage vehicle. So the, the definition, it has two wheels, then they're not cars anymore, or they're four wheels. They're not cars anymore. What you've done is you've changed the definition and based on how some of these policies get designed. And even from that standpoint, it leads to a potential huge risk in the future from breaking insurance exemptions and breaking taxation exemptions because it generally maybe fall into as a investment product versus a whole life insurance product. And again, that exposes someone in the future to a lot more risks that also leads to decreasing their usability of the product. So at Ascendant Financial, we focus on maintaining that integrity and empowering Canadians to take control of that function of banking. And you know, when it comes to designing the policies and everything that we go through a lot of good, you know, debates amongst each other within the team to make sure we are setting our clients up for that success. I'm not sure, Richard, you had anything to add on that.

Yeah, I mean, there's a couple things that you said in there. So I would, I would further add to that when we talk about things like whether it's insurance exemptions or tax exemptions, you know, the, the insurance contract is meant to be tax exempt and maintain being an insurance contract. If you shove too much capital in there, there's already rules in place that says, oh, hey, don't do that. If you do that, it's no longer an insurance contract, it's going to become something else. It's now more like an investment vehicle than it is maintaining itself as an insurance contract. And insurance contracts, whole life, whatever type of permanent insurance you're looking at is not meant to be an investment vehicle. It's not an investment. It is a storage facility. If you want to go do investing, which we would encourage you to go do. And many of our clients invest in their business. They invest in just a whole host of other things, the stock market and just you name it. So absolutely you want to go do that. We want to change where does the resource that funds the investment come from? Where does its original source located? That's what the insurance contract is for, is to replace that environment versus it being your savings account or some other, you know, methodology of you storing, storing and stockpiling money and then going and investing in another crap or great stuff, whatever it is. I'm just using the word crap because I'm opinionated today. Sorry. But if you, if, if that's what you're doing, you're gonna, you're gonna change the reservoir where the money comes from. And so the purpose of the insurance vehicle is not to, you know, knock out home run rate of returns out of the park. That's not its function. It is an efficient long term savings vehicle that solves a whole host of problems and it allows you contractual access for you to do the things in life that you're already doing, which includes investing. So that's its purpose when we talking about the infinite banking concept. So recognizing that that's its purpose, that should be what your focus is on, not on trying to make it so that for some reason you're chasing, quote unquote, like returns inside of the insurance contract because your return should be coming outside of the insurance contract even. Nelson talked about several examples where his best investments came from a policy loan. The policy itself did whatever it did. It did great, it did fine, it grew really well, it produced a great death benefit even though he set it up inefficiently in the for the first 15 years. But three investments he made from that policy created way more wealth for him and his family than the policy itself did. He says you can't see that on an illustration. That's the unseen of this concept. That's the infinite in the infinite banking. So how your imagination interacts with the policy is more important than some, sometimes to a degree than the policy itself. So not to say that there isn't importance in the policy. We don't want to make cavalier statements that saying the policy isn't important. It is. But you knowing and having a conversation with your coach about what that structure is going to look like and how it supports your objectives and the things you're looking to do and it supports future decision making. So I want to talk a little bit, Henry, and we're going to get back on this, but I got a soapbox here for a moment. Nelson's four rules. So I've got my, my Nelson book right here. His five rules, I should say. And I've got his rules laminated in the book. And so Nelson had four rules and then he added rule five. And in my opinion, David Stern's Nelson Suddenly added Rule 6, which is Plan for windfalls. But. Well, we might, we might talk about that today. We'll see. First, first rule is you got to think long range. Nelson says you got to learn how to think 70 years down the road. Learn how to think beyond your own lifespan, learn how to think past your own generation. That was what he was getting at. And so a policy design sometimes plays a role into these rules. So there's reasons that we have. As an example, you might have term insurance on a policy. I personally own a fair amount of term insurance. I owned a whole bunch of term insurance on my wife last year, roughly one year ago, I converted a whole bunch of that on her and I still left a little bit of term available for another conversion on her on another date. Now, my wife, who's absolutely amazing, I love her to death, she's just incredible. She has this really amazing job that she gets to do every day that I try to support her on, but primarily she just does it and she works 247 called Raising Children. Maybe some of our listeners will be familiar with that. It's not exactly the easiest job on planet Earth. There's a lot of work goes involved. She definitely works harder than I do to, to a degree on that. So because of that, my ability, because of her income as a someone that works from home, my ability to increase her death benefit and get more insurance contract is limited because it has a direct recognition on her income. Does that make sense? So early on, when I got the term insurance on her in the first place, I locked that in with the plan in mind, thinking long range, when I had more money and I had more capital, I would convert that into another policy at my discretion, on my terms, without having any issues to worry about insurability. Turns out I did a big chunk of that last year and I left myself room for another decision like that. So that is part of the long range thinking. And certain policy design can limit your ability to make those conversions on your discretion. Because in order to do some of this 9010 stuff, most often what's required is a giant term rider on a policy that is fictionally increasing the tax exempt room of the policy, but it's only increasing that room for a period of time. If it's a 10 year term rider, it's increasing that room for the 10 years. If it's a 20 year timer, it's increasing it for that 20 years. As soon as the policy owner who has all the rights and controls of the policy turns off that term insurance, if they decide to cancel it or convert it at somewhere along that stretch, that exemption room goes with it. So if you've shoved a bunch of money in that contract because you've got a 9010 and you have 90% of the money that's going in is because of this extra term rider's fictional tax exempt capacity, then what you're doing is you're storing it and then you're waiting for some future date where logically you will have to get rid of the term rider because the cost will escalate dramatically as you age. So the moment you chop it off it's like, it's like if you had this water jug. So hopefully people are watching this on the youtubes here. I've got this big, ugly water jug which I've not drank in very much of. I probably got to suck back some more after this call. And if I had all this room to put fluid in here, and then 10 years from now, I chop this jug down to the very bottom, the bottom 10%. All the fluid that's in there has got to go someplace. There's no more room for that fluid. It's going to spill out all over this desk and it's going to fry my computer. That would really suck. Well, in the insurance realm, if you do that, that's going to create a taxable event to the policy owner. And guess what? It won't be a friendly one. So if part of the advantages of doing IBC using whole life is that you can maintain tax exempt status, you better understand how that tax exempt status works if you're the policy owner and someone better be coaching you on it. So if you're positioning yourself for a nuclear tax event at some future point in time, boy, I sure hope you know about it because I'd hate to think that all that water comes out of this jug and it wrecks everything going on in my life. And then I got to pay a really big bill to fix it. A tax bill. So that's just one kind of isolated component of where we run into potential problems with plan design that is in contravention, in my opinion. This is my opinion. It's in contravention of one. In fact, a couple. But specifically one of Nelson's golden rules, which is you got to think long range. If you know that 10 or 20 years out that term riders got to go. And it's going to go because you don't want to pay the dramatically increased price. You better be thinking long range about that and your coach better be helping you think long range about that.

And in that, think of long range and you're talking about water. You know, maybe I can also illustrate another unseen component because a lot of the messaging that gets shared is, well, look at the numbers. Somehow the numbers are so much more such persuasive forms of evidence. And you know, we'll walk through some demonstrations of, of that later, but if we just kind of take another step back and look at maybe Richard, as you look at water, have you ever wondered how long your body can survive without food but with water?

Without food but with water, I'm going to guess I feel like it's like, like two and a half to three weeks.

You're not giving your body enough credit. It's actually about one to three months.

Oh, wow. Okay, now one on a water cleanse.

Have you ever thought about what about without water and without food?

Without water and without food, I'm only like three days probably.

So it's about a week. So if we're just talking about survivability, we're talking about, you know, about a month to three months without food and water, but just with water and then about a week without, without food and water. So the first part, if we look at it from the standpoint of health, and I'm not a health expert, but I'm just trying to illustrate a point here. People focus on optimizing things like their water intake, oh, I need to drink more water in my day, or their food intake, my calories, whether I should have carbs, protein and fats. And they'll look at things like their supplement, their exercise, all that stuff. Why? It's because it's quantifiable, it's all visible, it's direct goal oriented that they can, you know, measure and put together now in parallel. This is exactly similar to those who look at a 9010 design strictly based on the numbers that are fed to them by the advisor. And those numbers are fed in a form of a. It's in my opinion, complete, it's in a complete vacuum. So the first fallacy is you're going to get the numbers that the advisor has fed you. So you're only going to see the context of the numbers of what the advisor wants you to see. So you see the illustration, you get the numbers in the illustration, you see the emphasis of the numbers. So the part I first want to emphasize is when people are saying they want to look at the numbers, they want to see the numbers. I would firmly say, unless you see policy designs and you are implementing it for clients on a day to day basis, just like what we do, there's a big chance you most likely don't even know what numbers you are actually looking at and knowing how to interpret what they mean. And you know, whether or not you trust me when I say this, as a CPACA of over 15 years and you know who has been involved in keeping clients out of trouble. In my past life as a cpaca, financially modeling, acquisition, sales of business, I would say when it comes to scrutinizing numbers, I would put myself at the top of the list. Okay, numbers are important. When it only when you're looking at it in the right directional lens with context, that represents reality. Reality. Just like when you're buying a house, you don't buy the first house that fits your budget. You look at other things like location, neighboring schools, comfort levels, near neighbors, whatever qualitative factors fit your criteria to meet buying the home, you're not going to buy that first home. None of that is strictly quantifiable and measured. So when you're just looking at the numbers, you're not a lot. What people may not be considering is looking at it in overall context. Again, I just will talk about ease of accessibility, encouraging you to use your banking system. And you've touched on one of Nelson's rules, thinking long range when it comes to that policy design. So the other part now I just want to talk about is there's another part that a lot of people I believe take for granted. And so let me kind of use the body as an example. Let me throw this for you to consider, Richard. When have you ever tested actually how long you could survive without oxygen?

I, I can, I can firmly attest that I have never tested that.

You've never held your breath further, I've.

Certainly held my breath, but I've never, I've never done it under that auspices. So I, I mean, I, I, and it's been a while since I've had it, I've done anything of that. I mean, I have kids now, so maybe that'll be something fun for us to do and see how long we can hold our breath for. But, well, you know, I'm sure after 60 seconds I'm going to be gasping for air pretty quick.

Yeah, so you'll be gasping for air, but you know, the approximate timeframe is around four to six minutes. So if we look at the chain of people's prioritization of activities, we talk about the body's survivability. They focus on food intake, they focus on water intake, but very few focus on the actual oxygen, the quality of oxygen, the absorbability of the oxygen in your body. Don't you think it's peculiar that people focus on all of that stuff? But they, in my opinion, take for granted the air you breathe because you just assume it's there, you take for granted for it. And so the other parallel I will tie that when it comes to becoming your own banker, is the importance of controlling your wealth and your capital and what you have the ability to do with that wealth. So when we talk about survivability of the body, the vessel that your Body is there. Oxygen definitely, in my opinion, takes much more precedence over food and water intake. And then when it comes to banking and becoming your own banker, control is a very, very under unseen component that's not shown on an illustration. In terms of the numbers, that is definitely taken for granted and not even considered.

I, I like the example and I want to piggyback on that a little bit. Something that comes up for me, you know, referencing oxygen again, you're right. You don't think about it. It's, you know, you, your body is just tuned to do it. You just do it and boom, you're breathing. It's in and out. There you go. Well, to some degree the policy, a whole life policy in general has some just automatic things that it does. Even if it's a really, you know, crappy, boring, plain vanilla, you know, kind of a policy that has no extra bells and whistles on it, it still does some of these basic automatic things very similar to like breathing air. But you want to make sure that in the design of the policy you're creating enough, you know, adjustments to the client's benefit that allow some of that autopilot nature of breathing air to happen with the policy with the least amount of strife or impact where you're going to need to take a big gasping breath later on like the, like the term rider collapsing point in time that I mentioned earlier where the big gasping breath is the size of the tax bill that gets sent by CRA to your door. So yeah, I love the analogy. I think that's great. And I think there's a lot of ways to kind of play off that a little bit in relevance to the policy itself.

Yeah. And you know, I just will highlight in Nelson's teachings.

We'Re talking about becoming your own banker. And with what Nelson says, when you don't understand the process of banking, numbers don't matter. And when you do understand the process of banking, numbers also don't matter. I mean, how do banks make money?

They get someone else's money and they put that money to work and they take the difference in the middle and they just do a lot of it and they do it really fast and they do it on autopilot.

So their money is in motion. Right. So their money's always in motion. It's not just sitting there. What's funny is the messaging that we get taught is your money needs to sit there. But I would just argue the opposite of making money is putting the money into motion. And that's actually what the vehicle that we Use the whole life participating whole life insurance policy place preferably within mutual insurance company. I will speak to not advocating clients to always just keep their money parked. That's their choice if they want to keep their money parked for sure. But if they really want to enhance their ability and generate more wealth, they're putting their money to work, they're putting it into motion. So that's another very important aspect that also I would say is a very critical component that doesn't show up on an illustration.

Yeah. And so with that in mind, I want to circle back to Nelson's rule. So rule number two is don't be afraid to capitalize. You know, Nelson would, would further that up with saying, when have you ever heard of a business failing because it was over capitalized? That doesn't happen. Right. You know, the business that's over capitalized is the business that's positioned for strength to be able to acquire its competition in other businesses and invest in new technologies, et cetera. Number three is don't steal the peas. And then number four is don't do business with banks. So, you know, I want to talk a little bit, you know, circling back to the 9010 on don't be afraid to capitalize. So some of my colleague, our colleagues in the down in the States, you know, I like, they've made some points on this. Ryan Griggs as an example, Austrian economist, amazing guy. He's been on the podcast before and you know, he talked a lot about how the 1090 structure really is in violation of, in his opinion. And I, I would concur with him of the second rule of Nelson's, which is don't be afraid to capitalize. If all you want to put in is the, is the 10% in, in our $10,000 example, it's thousand bucks. And then $9,000 is flexible. Yeah, well, you might put in the whole $10,000, but you're only required to do the 1,000. And so to some degree you're, you're being afraid to capitalize a little bit. And so I want to walk that a little bit further. And so over time, in a lot of situations that $9,000 of flexible money, well, you might hit a cap where you're no longer able to put that 9,000 in. Now that could happen because we got rid of my water jug example, we cut down the term rider, so the ability to contribute that 9,000 disappears. So that's one potential reason. Another potential reason is that you needed to increase the size of your system and you had to convert some of your term insurance. Well, in our little example in the910, very often people won't be able to make that conversion because if they've overstuffed the contract, that's the same thing as chopping the term insurance off. So it's, it might not be likely or possible. And then, and then thirdly is that you're, you may have a.

Every policy, when you set the policy up has a, let's call it a pre approved maximum amount of what you can deposit in flexible premium, the paid up additions premium or the paid up additions rider as Nelson would call it. So when you set that policy up and you apply with the life company, the underwriting team at the life company is looking at all that total death benefit and they have this measuring stick called the net amount at risk. N A, A R net amount at risk. And they are saying, hey, based on today's numbers, if we're looking at Henry over here and Henry's this old and he makes this much money and he has this much assets, is it reasonable for Henry to have the death benefit way out here at age, you know, whatever, 70, that looks like blank, is that reasonable? And they will assess the risk on the life company for all that. Now given those factors, things like income, assets, age, et cetera, they will make an assessment and say, you know what, the lifetime amount of room that we're willing to grant Henry is, is X. Now with some companies they will say the lifetime amount you can get is a, is an annual maximum and you can maintain that annual maximum every single year for the rest of your life. And we'll just pre approve it for that, no problem. There are other companies where they might do that a little bit differently. They might say, you know what, we're going to assess your income and everything today and we're just going to set a pre approved maximum. And that's just it. And if you use up that whole maximum, you have to come back to us, beg, borrow for more of it. And we might say no. Now those are two fundamental different reasons that goes to the life company's decision making process which goes back to our hierarchy of plan design, which is where do you want to have the most amount of control as the policy owner? Again, this goes down to control. So you always want to have the contractual authority, the contractual ability to pay a premium. You don't want to have that taken away from you because of something the life company decided or some other reason. So you may want to have the option to not pay a premium. But you always want to have the ability to pay a premium. And so when you have a policy, and I'll just use this example, Henry, when you have a policy where when you're putting a dollar in, the policy is giving you $1.25 back, the next year you put a dollar in, it's giving you $1.30. Well, if you continue doing that and you go to the later stages of life, if you're putting a dollar in and it's giving you, let's just say $2 back for the purpose of our example. Well, how big do you want the dollar to be?

As big as possible.

You want it to be as big as possible, right? Well, if that is true, which I think most people would say the same thing, if you knew every time you put a dollar in, you got two out, you're going to want that dollar to be pretty big, well, guess what, that goes to base premium. So you want to have that thing getting bigger and bigger on your system so that when you're chunking that in, you're getting back this XYZ amount. Because the life company, if they have, depending on their assessment of things, they might limit you on how much flexible premium it can come in. Or you as the policy owner, because you're in the driver's seat of this, you as the policy owner might make some decisions, let's just say, that aren't to your benefit along the path. So I'll take that one step further. Sometimes with a company, when you have the flexible premium in place, if you don't contribute it for a number of years, let's just say for the sake of our example, let's just say five years. And the purpose of that flexible premium is to buy additional death benefit by paid up death benefit. Well, if you don't do it for a couple of years and then all of a sudden you say, hey, life company, I want to send that money back in again, well, they're going to say, geez, Richard, it's kind of weird. You stopped funding this for like a long time and now suddenly you want to do it again. Like, hey, has something changed? Did you develop terminal cancer between now and five years ago when you last funded this premium? And I'm like, no, no, it's all good guys, go ahead, just take my money. Well, not exactly, because the life company is responsible to who? All of the policy owners. And if there's someone that is going to produce an adverse risk on the pool that everyone is sharing in, they have to manage that effectively. So that there's not extra dilution and money being pulled out of that, that pool of money for all parties. So they have certain things that they do to manage what they refer to as anti selection on adverse lives affecting the money pool. So they have certain rules in place and as long as you play within the rules, everything's fine. But you need to know what the rules are. Okay? That's part of what a coach is going to help you out and ongoing training will help you out with. This isn't a one and done kind of a scenario. This is ongoing learning. Well, if I, if I again, Richard has now terminal cancer and I want to go put that money back in, they're going to say no, sorry Richard, you had to fill in some medical questions and we're going to refuse your ability to do that. But guess what, because you locked in your policy a long time ago, you can always pay the base premium all day long. We can never stop you from doing that. Well, if the base premium is only 10% versus 90% and I can't put the 90% anymore because of that, you know, a reason like that or something similar, all I can do is the 10. And I have a whole bunch of policies that are all tens. Well those tens don't add up to be enough premium I want to pay. So now when I go and sell a rental property and I have a big influx of capital, I can't pay enough premium. Now when I sell my business and I, you know, get to use my lifetime capital gains exemption, I got a bunch of tax free money I want to shove into my policies. I can't get it in there because I don't have enough room for premium. Now when, you know, my parents or someone else passes away and there's an estate transfer of money, I don't have the ability to pay enough premium. So this goes back to Nelson's rules of you got to think long range, don't be afraid to capitalize.

I completely agree with you and I think, you know, just as the listeners are going through it, we're going to walk through a demonstration to show specifically the points of what, you know, what you're talking about, Richard. And if I were just to look at it, we all ourselves own policies and practice it day to day as part of our life. It's become our way of doing things. And I'll just kind of first backtrack to first say a 9010 policy design is not even realistic. My oldest client is semi too and you just can't even design that so I think the marketing messages that are going related to this style of design, I would call it a pretty big disservice in misleading the Canadian public. Fortunately, there's not really any, you know, regulations around that. And not saying that there should be, I'm just saying that it just brings people the incorrect impression of what becoming your own banker is focusing so much on designing a product to match a specific threshold because this, these numbers appear a specific way that it, you think it's supposed to appear. And we just want to tie it back to that. When we design policies, it's unique, specific to you, your circumstances, your family dynamics, which includes your age, your gender and a whole bunch of other factors and like achieving your goals and objectives. And when we say we are coaching our clients, we are actually coaching our clients on achieving and working with them. It's a two part relationship to achieve the goals that they design to do. Whether it is things like recapturing their debts or enhancing their investments or taking opportunities on investments, those are things that they will come to us to shed some light on. How can I work with my policy to get that, deploy my capital for said reasons. But you know, we first start with setting up the tool. And the other part I just will talk about aside from the practitioner and your coach actually having a policy. So this is not just an insurance advisor who runs an illustration says here's an IBC policy, see you later. I hope you get there. And Richard, I just will put you on the spot here because I think a lot of people don't actually know the level of benefit that I get to be as part of your team member and I'm very, very grateful for, is how much you actually care about the people that you are doing this for. So when what the listeners don't really know is that you actually do go the extra mile for clients and not just for yourself. And so it's not just for your clients, it's also for everyone by proxy near you. So whenever something new happens, whether it relates to policy design or, or carrier issuing a new fund for a whole life insurance policy, one of the first conversations that I know that you know that I have with you is that you, you actually go and get the policy yourself and work through the experience of what becoming your own banker would be with that carrier now or that product or that change or whatever that has happened. So you are the guinea pig for everyone else to benefit. And by proxy for myself, just speaking for myself, I get to benefit from your learning without me actually needing to do that. I can't. I, you know, you save me a lot of time and experience when I do that. And, you know, separate to that, you also provide actually a lot of helpful and useful constructive feedback for said organizations to improve. And, you know, a lot of the time, I don't know this, but I would.

Those, those organizations may not, may not, may not agree with your last statement.

This is where I was going to say. I, you know, I don't think you actually get financial compensation or whether they even consider or implement it. So we, we all benefit from that. And these are just collective experiences that as a practitioner or a coach to my own clients, I get to carry in the back end with confidence knowing that, you know, I don't have to shop around for, you know, whatever reason. And, you know, that's not what we're here for. What we're here for as a mission is to design policies for our clients to begin taking control of their wealth and practicing the process of banking.

Well, thanks for that, Henry. And you're. Yes. I mean, there's a couple of companies who've recently launched a brand new PAR account and a new, new PAR tool. Two of them specifically. And like, one of them is like, now a little over two years old with their PAR account. And so I haven't, I haven't applied with those companies simply because they haven't finished answering certain questions. Like, one of them doesn't even have a policy loan form. They have no specific set of mechanics on how a policy owner would take a policy loan. And you can't get an answer out of anybody, a straight answer. So which, you know, you could say that that's a little bit disturbing and disheartening. They don't even know what the loan, the loan interest rate is. So those are some of the things where it's like, okay, well, yeah, I'm interested in testing this product because I want to, I want to run it through some of those gamuts of things. But until they can answer some of the basic questions, I mean, it just doesn't make sense to do that. Now. I'm glad that there's an option for people who have term insurance and they're uninsurable. Hey, there's something, There is something is always better than nothing. But, you know, you're right. And so one of those particular contracts that I have is in a, it's not exactly a 9010 design, but it's, it's in the, it's in the spirit of that. It is a, a policy that has a lot of flexibility to it from that vantage point. But I can say emphatically that it is by far the most frustrating and aggravating policy that I own. It causes me no end of irritation and thankfully I have an amazing assistant. Paul. Paul, if you're listening, you're fantastic. Paul has to deal with most of that and so it requires a constant amount of follow up with the company because to date, and I'm now, I don't know, four or five I guess I'm, I'm coming up in, I'm in my fifth year, I think of that contract or four and a half years, I don't even remember exactly. But so it, overall I'm, I'm reasonably happy with the contract and what it's done. However, my ability to interact with the contract as the policy owner, not as the advisor, although I can tell you the advisor side's pretty crappy too. But as the policy owner, if I had to go through an advisor and do the things that I'm doing, I don't, first of all, I don't think most advisors would be able to keep up. And secondly, the amount of delays and frustration on how funds have been applied incorrectly, inaccurately, waiting to get them reappropriated correctly, trying to get feedback back from the life company so that they can apply correctly so that I can take a policy loan again, like these kinds of things have been so unbelievably frustrating. I don't, I honestly don't know how to put them into words. I, I, I don't think the words are appropriate for our podcast, let's put it that way. But yeah, it's caused me no end of frustration. Now I have a specific reason and intent for that policy. One of them on the so I have a top level reason, I don't mind sharing it. But the, the supplementary reasons are exactly what you said. It's to test it. I'm not going to offer that contract to someone else if I don't have one because I don't know anything about it. So I'm the first one to jump in the hole. If there's a hole to be dug, I'm gonna grab a shovel and I'm gonna start digging. And you know, going through that process of taking loans and trying to repay them has been abysmal. Trying to fund flexible premium has been abysmal. And trying to have them appropriate the data or do response on it has not been good. Receiving the policy loans in a timely manner has not been good. And it also none of Them also none of them have been consistent. So there's a whole host of kind of issues there and there's expectations as a policy owner that you would want to have that are reasonable that an advisor should be able to coach you on around some consistency. So you want to make sure that a life company that you're working with around functionality. We talked about the hierarchy. Functionality is extremely important and if you have zero functionality, well then what good is the policy to you? Regardless of what the illustration looks like, it's not, it's not very good. Now I will state I'm happy with that contract but the reason I'm happy with it is probably different and it's because my intention was to find a way to increase death benefit on Richard in a certain vein that I wanted to do and I wanted to have the policy more as a, I'll call it a windfall policy. So the ability to deploy capital when I come into windfall events now the windfall events have been farther out than I anticipated but I'm hoping for some in the in the future and then you know I'll have a place to deploy capital on policy loans and into some premium. So those are just some high level components to share.

And if we look at again just the process of banking, not the product Richard, your ability to deposit premium or deposit funds into that banking policy, let's just say is not a very pleasant experience being the borrower. So first is the process of depositing. The second is accessing a being a borrower of money. That process has not been very good. Repaying it has not been very good. Being the banker in the equation we have some parameters in how we'll set up the policy and becoming the banker for it and the bank owner. That's why mutual insurance companies are what we prefer because you are by virtue of owning a policy a co owner of the insurance company. That's you know, these are kind of some of our guiding parameters going through it and you just sharing your experience.

That company is also not a mutual company and it in my opinion this is very much so an opinion in my opinion. Now having done business with them from an advisor standpoint and as a client for a number of years, they do absolutely nothing to support their participating owners. Doesn't mean that they don't manage the money pool well I think they do a fine job of that. At least it appears to be so. But there's no clear intentional relationship aspect that they have with the participating owners because their focus, it appears to be their focus is on quarterly share profits for their stock owners. And the par owners are second tier. So it's all goes down to the alignment of values on how the company is run and managed. A mutual company's values are aligned with the par owners because there is nobody else. That is the fundamental difference on how mutual insurance companies think about managing capital and working with their clientele because their clientele are also their owners.

When you're trying to be number one, there's no number two, there's only number one. And when it's policy owners are number one or stock owners number one as the primary owners, we know where, where the resources get diverted to and prioritized. And you know, I think now if we will just walk through just a demonstration of a policy illustration of the insurance company. So I'm just going to walk through very quickly just using a very simple example of I've, you know, deliberately just. We've taken illustrations from the policy designs of a standard one that we will issue or you know, consider for a 45 year old. And that's what you'll see here from here on this aspect here. And then we'll see another example on the right for the individual using that popular marketed policy design of a 9010. And so. Well, you know, I kind of wanted to keep it a little bit simple in terms of the age. So from 45 this family will deposit $50,000 into the policy and for it all the way until 13 years. And I guess for the listeners who are watching, make sure to revisit it on the YouTube to see the actual figures that I'm walking through here. And so that's for up until 13 years. And then so if we look at for like, for like both policies are depositing $50,000 but the design of that $50,000 is where some of the difference is. And so for the one on example A where the starting death benefit is 453,000 up until age 100 with a 5, $500,000 term rider for 20 years. So that starting death benefit is 953,543. Now the one on the right, the whole life component of the death benefit is $156,000 and then it goes to age 90 and then adds the term Rider of $1,000,000. So that gives a $1,100,000. So there's right off the bat the two death benefits. The one on the left is that policy design that we generally will put together towards and the one on the right is the 9010 and the death benefit is a lot lower, but the same premium that's going in is, you know, it's the same premium going in. But this is where the mechanics of the details are going. Richard, do you have anything to add?

Yeah. So just to summarize really quickly, so example A is again it's, it's, it's a whole life policy where you can see the whole life insurance amount is much higher. It's 453 versus example 2 where it's only 156. So that's one of the primary differences, which is why the quote unquote base premium will be higher in example A than example B and the term rider. Again, could we have solved for this in this example to make them exactly the same? The answer is yes, but the death benefits are similar. One's a little bit one's the other one. If we needed to solve for quote unquote a proper death benefit number, then that would be taken into consideration as part of the design. So for the purpose of this, that's not what we're looking at. We just needed to modify the term insurance enough, get it high enough so that we could create a 9010 scenario.

We would lift that term insurance on example A instead of it finishing at 500 would bring it up to, let's say 700 to get to the 1.1 very similar levels.

Now if we needed to solve for the coverage, we would absolutely do that and take that into consideration, but for.

The purpose again individually considered as part of our policy design, policy discussions, our initial discussions with our clients. So the next part is now looking at that deposit. Where you'll see here the total deposit is 50,000. But how the component of that 50,000 is constructed is the total base is that 13,208. And the paid up additions rider is 36,792. So total adds up to 50. Now the base is required as part of the whole life insurance component and the paid up additions is the optional component with the flexibility built in to deposit according to your control. And that would be from that standpoint. Richard, you have something to add?

Yeah. And just to reaffirm like we said earlier in the podcast here, that the base is the whole life required amount plus any riders. So in this example, each policy has a rider, a term insurance rider. The term insurance is over 20 years in both examples. So we're looking at a 20 year outlook and that is formulating part of that base premium amount that we're looking at.

And then on the right side is the, you know, 9010 policy design where the base is a 5,000 compared to the previous one of 13,000 and the paid up additions optional component is 45,000 compared to the 36,000 which formulate the 50,000. So when we initially talked about the construct or the composition of the initial onset deposit premium of 50,000, the 9010 design that we're specifically speaking to is 5,000 is to the base. 45,000 is paid up addition deposit total. For me, the 50,000.

So now the next column here, I want to talk a little bit about this Henry. It, it goes to the, something we talked about at the beginning of our session was the approved optional deposit room, the lifetime capacity of deposit room for that flexible premium. Company A is going to, is saying, yeah, as long as you're consistent and you keep going and doing it, you can put $36,700 a year into this thing all day long. If you miss five years, well then we have to ask you some questions to turn it back on again. But as long as you're consistent, you will have the ability to continue putting that in for the rest of your life. So if you're age 45 and you, you, you go to age 100 and you take the 37 grand and you multiply that those years out, it gives you an approved maximum of over $2 million. In other words, flexible premium to age 100. You could shove $2 million into this. Paul, this one policy, if you wanted to, you, you have the capacity to do it. It's pre approved.

And it's done on.

Each year as opposed to overstuffing it in. But it's granted right from the life up until the lifetime of the contract until age 100.

Correct. And so in company B they operate a little bit differently. Now again there's different. Every company has their own rationale and dealings of this. But for company B, they have a slightly different way that they look at it and they say, hey look, based on your income today, based on your assets today, Mr. 45 Year Old Individual, this is how much we're willing to assess you and approve or pre approve as a, as a, as a capacity for the rest of your, for the rest of your life. Now if that is the case, which it is, you know that has to be relevant. So here's a 45 year old individual that makes about 125 grand a year and his spouse makes about 75 grand a year. So the household income is about 200 grand. Well that's a, that's a pretty good earning Canadian citizen. Like that's a, that's a Fairly average base 45 year old family, I think with 2.4 kids or whatever in the country. And so they're going to be limited to how much the life company will approve. And then the advisor being able to negotiate maybe with a cover letter to try and stretch that number a little bit. But if you ask for too much, if you say, hey, I want to be able to put a million dollars into this thing, they're probably going to come back and say, no, we don't see that your financial status is enough to warrant that. So we're going to cap you at a number. If you use up that 585,000 of lifetime capacity, well then you can ask us politely for more and we reserve the right to tell you to go pound sand, basically.

Well, just and for context, it's the 500. So this particular policy design created a approved amount of 585,000. So that 45,000 that you're putting in is capped at the 50 per year, which accumulates over time to 585,000. So once you hit that 585,000 compared to the previous design of, you know, how we would generally design our policies is 2 million 585 compared to 2 million. In the thinking long range point of view, you can already see that the amount of money, even from a short term standpoint, maybe you could stuff more and feel like you have ability to use more. But the longer term, it's as Richard mentioned, you're cutting off the water bottle right away once you reach that point in time, totally.

And so, you know, follow this through over the next kind of 13 years just at a high level. Henry. So people can kind of get a picture as to where we run into this, this problem of, you know, why, why this is not thinking, like how does this violate thinking long range essentially for sure.

And so if I look at column H that I'm showing you on example A On that policy design, 36 is the first year of optional room. And let's presume the individual puts in that 36,000. The next year the person can put 73 on as the optional portion. And so it accumulates, sorry, 36 again. So it accumulates cumulatively at 73. So if we take it all the way to year 13, the individual has been able to fill in 478,296 on that. And compared to their lifetime capacity of 2 million, they still have 1.5 million more to fill in, in the future, as in, for example, when they get to 59, 60, 61, 62, all the way to age 100, they still have a lot more room to fill in the shelves of their money in their storage warehouse. There's no one stopping them at that capacity because the policy was already designed upfront from the individual's current medical history of when they were healthy and is not needing to be reconsidered as opposed to now. If we look at the example B, the cumulative option, the person can put more 45,000 compared to the 36 per year. But over time, cumulatively the second year is 45, so it's 90,000 now, so on and so forth. So by the time the individual gets to 58, similar to example A, the full 585,000 has filled up the capacity of the warehouse and now there's no more room. And Richard, you can expand on this is now this is where reality hits, hits for the individual. So maybe if you can share that part now.

Yeah, so there's a couple problems. We're 13 years later and here's some potential problems. Well, if you've been putting 50 grand a year in for 13 years, first of all, you developed a great habit. So high five, congratulations, well done. Nelson would be proud. But if you want to continue that because you've got that habit built and you want to do that for another 2 years, 3 years, 5 years, 10 years, however many years, and now you can't, this particular policy would limit you to only putting in $5,000. Now, out of that 5,000, a portion of that is funding the term rider, which in seven more years is going to disappear anyway. So the actual amount of real whole life premium that you can pay is probably only, let's say, let's just call it 4,000 bucks, hypothetically speaking, so you can only put in a smaller dollar. So going back to our earlier example, if you could put a dollar in and get $2 back out, but now the size of that, you can't put a dollar in anymore. Now you can only put in 30 cents or 10 cents, then that's part of the problem. Whereas in the first example, yeah, the base premium is a little bit higher. Your minimum requirement is higher. It's 13,200 bucks. Well, in the same scenario in example A, even if you stopped funding the flexible premium, you weren't putting in 50 grand, but you were still putting in the 13 grand. You have more capacity just on its own, just with the base premium availability. And so at some future point, let's go out to age 65. This person says they want to, quote, unquote, stop funding premiums. Hey, fine, if that's what you want to do, that's all good to you. But now eight years goes by and they sell a rental property and they have a big influx of capital. Can't they use that amount of money to pay the base premium for a number of years? Well, on policy one, they can pay more premium, which will give them way more back because the policy is so efficient. Whereas in example 2, they're limited to whatever that base premium is, which in this case is very small. Now, the other risk that they have is if they want to go get another policy at this point, they have to go and apply for another one. And now they're 58. So what if they can't qualify? What if they're not medically insurable? Well, they can't convert the term insurance necessarily, potentially. And maybe they can, or they can to a degree, but probably not all of it. In example two, because they need to maintain that term insurance on that contract to absorb how much extra capital they were allowed to put in. So they're restricting their ability to go get a new policy because now that policy won't allow them to deposit what they want. So they're limiting their contractual authority at multiple stages of the game.

And just to add in there, this is 13 years of the habit that they built. And in the policy and the way that is designed, when you've put in more premium or deposit that same premium in there, your policy has. Has built such an accumulation of a mountain. Now you've built a tailwind that is going to return much more money than you've put in in the form of cash value. And why would you suddenly now cut that mountain off? I would suddenly cut. As my mountain has built up and I put in a deposit and I am getting more value in my cash from what I put in in my deposit. Suddenly, after 13 years, which I'll never get that time back again, I decide to cut it off and end it from giving myself extra money. That. That doesn't make sense.

Yeah, it seems a little bit counterintuitive. Again, it's not saying that this policy is a bad policy. That's not the only intent it's going to. What is it that you want and how much control do you want to have over the scenario? Now, I want to pivot for a moment off this, Henry, and because I want to. You know, I think once the horse is dead, we probably don't need to beat it too. Too much more. But you had another example up and, and I think this is something we should look at and that's going to Nelson's book. Now, in Nelson's book, first off, there were no term writers used for anything, number one. But Nelson, he had several examples and illustrations in his book. Many of these for people especially their first read over sometimes are a little bit confusing. But there's six total examples that he goes over. These examples are all done differently. So Henry's got up on the screen here an example of just a spreadsheet where we look at, hey, there's the twin sister example, equipment financing. There was a child example, John and Susie Q student and then a girl named Jill where an uninsurable father got a policy on her. So these are the different examples. Well, the makeup and design of these examples are all different, different from two different vantage points. Number one, the structure of the premium and then number two, the structure of the policy itself. So several of these are life paid up at age 65, which isn't really popularly available in Canada any longer. It might be in the States, I don't know. But it's a life pay to age 65. So if you were 45, at age 65, it's fully funded. It would be 20 years. If you were 20 and you got it at age 65, it's fully Funded. Most policies that we do in general are life pay to age 100. From time to time you may see a life 20 pay policy where it's fully funded in 20 years. It just varies on the structure of what the client's looking for and their needs. But here in Nelson's book there's several different examples. There's life pay to 96, there's a life pay to 100. So there was several different iterations. And then the percentage of premium, what is the base premium versus the flexible premium, the paid up additions is different in all these examples as well as. So Nelson didn't design the policies in the book on one standard. It wasn't 40% this, 60% that, 9010 this, or it was none of these variables. It was based on what he wanted to accomplish in the illustration to teach a point to help people understand. And that variability of design is part of the conversation that you have with a coach to talk about as you go through your circumstances, your financial junk drawer and you unpack those things and you look at your future. How can we put the policy together based on each individual person in the family that we need to Accomplish an objective and then where does the need live? Which body needs the most amount of coverage? So those are all components that get addressed and talked about when we talk about this design process. So say that there's again that magic bullet that's going to solve all your problems with a policy design. Not only is it ludicrous, it's, it's just, it's just not thinking things through. And rule number five is to rethink your thinking.

And you know, I just will dive into. We're talking about the pioneer of the concept, R. Nelson Nash, becoming your own banker. And now this block is about a 90, 92, 90ish page read. It's very simple, read with, you know, the text is not very large with.

A lot of illustrations and only 77 of those pages actually have words on them.

And so when people are saying, I want to see examples, I want to see how becoming your own banker looks like. First place we always tell people want to build their own family banking system is get a copy of reading the book because the illustrations are all there. Now for those who haven't actually read the book, nowhere in reading the book, as you mentioned, Richard says that this is the philosophy of how a policy needs to be designed. Becoming your own banker, as the name implies, your own banker is you have goals and objectives and things in your life. I have goals and objectives in my life. You have, Richard, your goals and objectives in your life. You listening? Have your own goals and objectives in your life, which is vastly different than mine. I don't, as an example, enjoy investing in real estate. Some people love to invest in real estate. Despite my, you know, many years of experience coaching and providing professional service for real estate investors, I don't enjoy that landscape. And so my way is different than everyone else's way. And that's okay. But the key is there's nothing that inhibits me in designing my own policy system, in achieving my goals and objectives. And that's what working with a great coach will do to extract the things that you want to do and building a system to help support what it is that you actually do. And of the six examples with the numbers and the illustrations that are there, we have six people who have very different goals. One was a policy designed for financing all of their cars. One was for financing their logging business. The other was for funding education and future building a future legacy. One was again college and business. And one is asking about if they're not insurable. Their situation is very different. And those policies, as you were sharing, Richard, the Policy for the individuals who are financing cars for one person all of their life was funding a policy. $5,000 per year and the base was 60% compared to what we were showing you, around 26% and the other one was 10%. There is no magic number to the policy design related to the structure of a premium.

Well. And that. You nailed everything there, Henry. And I think we could probably clear that off the screen. What really comes up for me in this is again, Nelson's rules, Nelson's fundamentals. And one of the things that Nelson would say, it's in the book. I think it's on page 11 or 12. Nelson says that this is an imagine. This is an exercise in imagination, reason, logic, and prophecy. You have to exercise your imagination. His book is designed to stretch your imagination. That's its purpose. Reason means you have to reason things through by thinking them through. It's all about how we think logic. Logically speaking, if you knew that you would get back every single dollar you put in a system and would you ever object to putting any more into it? The obvious answer is no. It's a rhetorical question. Then you want to get as much money into Premium as possible, which means you need to be able to pay a premium. That's very logical. If we just stopped it right there. Just chew on that for a minute. So this type of thinking is something that informs both advisor and the client in plan design aspects. There is no one size fits all. If that's what you're looking for for ibc, you need to rethink your thinking. You need to read the book again. Something didn't gel as you were going through all the information. Watch this podcast one more time. Okay. There's tons of content we have available. Go and gobble some of it out. Listen to our client series interviews and recognize that you are in the driver's seat of this situation. But you need to have someone that's there to help you in some of the technical aspects of the coaching aspect. And once you get your policy set up, it's not a wham, bam, thank you, ma', am, we're done. Your journey is really just starting. And you got to take your first loan, you got to repay that loan, you have to take another loan, you got to repay that loan. Like there's all these other things you need to do and you need to be involved in a group or community of people that is constantly learning the way that you are. This is how we progress throughout time. So think of your financial life as a constant progression of Things that you're doing and you're adding to your repertoire of capacity. You're doing that with your policy system and you're doing that in your learning journey. Don't ever stop learning. There's no such thing as, as having arrived in knowledge. Please don't give up your inspiration to learn. And it's nothing to say that, hey, the 9010 policy is the worst thing on planet Earth. That's not at all what we're saying. What we're saying is think it through. Think about what it is that matters to you. Recognize that hierarchy of decision making and functionality is tremendously important. In my opinion, it's one of the things that trumps a little bit of that. And the final thing I'm going to mention, Henry, is I have a number of policies where the base premium is actually more like 70, 75% and the balance is PUA. Most of. In fact, I would say most of my contracts are like that because when we started doing this, that was all we primarily had available. And would you believe that forced me to prioritize the premium? It forced me to be very intentional about how I saved money for premium. And now that, that's. Now it helped me conquer Parkinson's law, which is what Nelson talks about in his book. And did all those policies build up cash value? Say yes. And are they smoking cash? Every time I put a dollar in and there's money back out, the answer is yes. Is it buying paid up insurance? The answer is yes. Did it ever stop me from implementing this process? The answer is no. If anything, it enhanced, I believe it enhanced my ability to pay this process. And I have a sufficient amount of base premium in my family's system that I have no concerns about my ability, my contractual authority to pay a premium into the future when I want on my terms, because I'm the banker. Okay? So recognize that there was this whole fallacy that there's only one way to design a policy is ridiculous. And I hope that we've clarified that enough on our call today. And I enjoyed the living crap out of this. This was a lot of fun. Henry, we got to do this again. I think our listeners will enjoy it as well. I don't know if this goes on the rant category or not, but I certainly think that we provided a good education today. Hey, if you're on the YouTubes, poof, there's some videos that just showed up. Go ahead, click on one of those and keep learning because it's probably an amazing podcast with either minor. Henry's or Jason's face on it. Go ahead and check it out. And thanks again for tuning in, and we'll see you on the next episode.