By city

Infinite Banking in London, Ontario

London sits between a large health and education sector, a long history as an insurance industry town, and the farm country of southwestern Ontario. Each of those three pulls this analysis a different way.

An insurance town, which changes the conversation

London has an unusual history: it has been a centre of the Canadian life insurance industry for well over a century, and a meaningful number of residents have worked in or around it. That produces a readership more familiar with the mechanics than most, and it raises the standard this page has to meet.

So here is the honest version for a reader who already knows what a participating account is. This strategy is not a product and nothing about it is proprietary. It is a use of an ordinary participating whole life contract, sold by ordinary insurers, in which the owner treats the contractual loan provisions as a source of capital rather than a last resort. The mechanics are familiar to anyone in the industry. What the book adds is a discipline for using them and, more usefully, a set of reasons not to.

If you have worked in the industry you will also know what to distrust. Illustrations projecting a current dividend scale for thirty years. Comparisons that count fees on one side and not the other. The phrase becoming your own banker used as though the policyholder becomes the lender, when the insurer issues every loan and receives every dollar of interest. Those are the failures this book names rather than repeats.

Health care, education and the pension question

London carries a large hospital and post-secondary sector, and with it a substantial population holding defined benefit pensions. If you have one, half the usual argument does not apply to you: the retirement income case is substantially weaker than in American material that assumes you have nothing of the kind. What remains is access, because a pension is not collateral, and the survivor question, which depends on reading your own plan rather than a general answer.

The farm question, which is a southwestern Ontario question

London serves an agricultural region, and farm succession raises a problem this contract has addressed for a long time independently of any strategy. In Canada death triggers a deemed disposition of capital property rather than an estate tax. For a family farm that means a tax bill lands on the estate while the value stays locked in land and equipment, and the ordinary solution is insurance providing liquidity so the next generation is not forced to sell.

That is worth separating from the strategy argument because it stands on its own. If your real problem is succession liquidity you may need insurance and not need this strategy at all, and an honest practitioner will say which. Qualified farm property also has its own rules under the Income Tax Act, distinct from the qualified small business corporation tests, and that is a question for an accountant who works with farms rather than one who does not.

Ontario rules

Insurance in Ontario is supervised by the Financial Services Regulatory Authority of Ontario, and a professional here holds the licence of a Life and Accident & Sickness Insurance Agent. Under the Financial Professionals Title Protection Act nobody may use the title Financial Planner or Financial Advisor without an approved credential, and a life insurance licence alone qualifies for neither. Verify the licence in the public register and ask how the person is paid.

Where it does not fit

A reader with a strong indexed pension, no dependants, no corporation and no identifiable capital need is a poor candidate. So is a household early in a mortgage, without an emergency reserve, or carrying high-interest consumer debt. Cash surrender value is typically below cumulative premiums for many years and commonly for more than a decade, so an early exit is a loss.

Nothing on this page is advice. No assessment has been made of anyone reading it, and the author is not a neutral party: he is licensed to sell the contracts this strategy uses and is paid a commission when one is placed. Ask for the illustration on the specific contract, read the guaranteed column first, and take the answers to an accountant and a legal advisor of your own choosing.