Blog - Safest Account for Cash: Banks or Insurance Companies?
If the economy did collapse where would you want your cash? Would you want it in a savings account with a bank or in a cash value whole life insurance policy with a mutual insurance company?
The FDIC insures money in bank accounts and mutual insurance companies have reserves backing policies but which is more stable?
Join me as I describe to you the features of safety in both banks and mutual insurance companies, then you decide where the safest account for your cash is.
Below I am going to describe two different corporations and you tell me which you feel more comfortable in saving your money in. For now, we will refer to them as Corp. A and Corp. B. I promise to tell you which is which when we are finished comparing the two.
HOW ARE MY DEPOSITS BACKED
How do I know my money is safe and that I will have access of it no matter what?
A third party, federally regulated corporation insures that their cash reserves will back your money on deposit up to a pre-determined amount.
According to state regulations, Corp. B must hold a portion of their assets on reserve as either cash or liquidable investments. They do this on a dollar for dollar basis up to $100,000 of annual deposit. Anything above that amount is based upon the corporation’s analytical, mathematically determined tables.
OWNERS OF THE CORPORATION
Who owns the corporation and how do they affect me?
Shareholders own the majority of these corporations, though some are privately owned.
Customers of this corporation own the corporation together.
CORPORATIONS BUSINESS MODEL
What does the corporation do with your money and how do they make money to operate?
This corporation gives you an amount of taxable earned interest each month on the dollars in your account. This is a piece of the return of the interest that they earned off of your dollars.
This corporation makes money by lending your dollars for up to 10x the amount in your account. They are required to reserve 10% of your dollars in your account in the form of credit card loans, business loans, car loans, home loans, etc. This corporation can use your deposit as a loan to someone else.
This corporation gives you a final number (let’s call it a goal) to reach in your account. Each dollar you put into the account is guaranteed to grow at a specific rate (that varies within corporations) to reach this goal at a specific time (that varies within corporations). You can use the cash in your account by withdrawing it (it will quit growing at this time). However, to allow your cash to continue to grow you can use the corporation’s cash at a specific rate pre-determined by the corporation. This is considered a loan and the amount loaned is restricted to the amount in your account.
This corporation makes money by investing in secure assets as well as engineering analytics to be sure they have the funds to back the guarantees as listed above.
Here’s a quick recap:
- Money is backed by a 3rd party insurance company who
- Shareholders own the corporation
- The corporation uses the money in your account to create money from other people and returns a small share back to you
- Money is backed by the corporation on a dollar for dollar basis (up to $100k)
- Customers of the corporation own the corporation
- The corporation actuarially guarantees your money to grow at a predetermined rate and invests in secure assets
So, which corporation is which?
Corporation A: The Bank (and savings accounts)
Corporation B: Mutual Life Insurance Companies (and specifically, the whole life product)
Infinite Banking concept utilizes whole life insurance as a way to create a self-loaning system, taking out the third party. Let us share with you more on how this process works.