Leverage Strategies Compared
Internal vs. External Leverage for IUL
If you're researching leveraged life insurance strategies, you've likely encountered different approaches with different names. This page clarifies the landscape and helps you understand which—if any—is right for you.
LIFT uses internal leverage—borrowing against your policy's own cash value to fund additional premiums. No external bank involved, no credit check, fixed loan rates available, no margin calls. Kai-Zen uses external leverage—bank loans fund your premiums in a 50/50 split arrangement. Requires bank qualification, variable rates, and $5M+ estate typically. LIFT targets 12%+ returns with 1.5-2x leverage; Kai-Zen targets 15%+ with 2-3x leverage. LIFT is simpler and more flexible; Kai-Zen provides higher leverage but more complexity.
At a Glance
| LIFT Target Return | 12%+ |
| Kai-Zen Target Return | 15%+ |
| LIFT Min Premium | $50K/year |
| Kai-Zen Min Premium | $100K+/year |
Categories
The Two Categories of IUL Leverage
All leveraged IUL strategies fall into two categories based on where the leverage comes from
Internal Leverage
Definition: Borrowing against your policy's own cash value to fund additional premiums
How it works:
- You fund the policy normally in early years
- Cash value accumulates
- You borrow against cash value via policy loans
- Borrowed funds pay future premiums
- Cash value continues growing on the full amount
Brand names:
- • LIFT (Infinite Wealth Builder)
- • FlexMethod (National Life Group)
- • MPI (various marketing terms)
- • Duplifunding / Hyperfunding
Key characteristic: No external parties involved—everything stays within your policy.
External Leverage
Definition: Using bank financing to fund policy premiums
How it works:
- A bank provides loans to fund your premiums
- Your policy is collateral for the bank loan
- Typically "50/50"—you pay 5 years, bank pays 5 years
- At exit, loan is repaid from policy proceeds
Brand names:
- • Kai-Zen (NIW Companies)
- • Premium finance programs (various banks)
- • Institutional premium financing
Key characteristic: Involves third-party bank relationship with separate underwriting.
Comparison
Head-to-Head Comparison
Detailed comparison across all key factors
Core Mechanics
| Factor | Internal (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Leverage source | Policy cash value | Bank loans | None |
| External parties | None | Bank | None |
| Underwriting | Insurance only | Insurance + bank | Insurance only |
| Loan type | Policy loan | Commercial loan | N/A |
| Interest rate | Fixed 5-6% | Variable (bank) | N/A |
| Margin calls | Never | Possible | N/A |
Qualification Requirements
| Factor | Internal (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Minimum premium | $50K/year | $100K+/year | $15K/year |
| Minimum estate | None specified | $5M+ typical | None |
| Bank qualification | Not required | Required | Not required |
| Credit check | No | Yes (bank) | No |
| Collateral | Policy only | Policy + possibly more | None |
Risk Profile
| Risk Factor | Internal (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Lapse risk | Moderate (managed) | Moderate | Low |
| Bank relationship risk | None | Yes | None |
| Interest rate risk | Low (fixed available) | Moderate (variable) | None |
| Forced liquidation | Never | Possible | Never |
| Complexity | Moderate | High | Low |
Return Potential
| Metric | Internal (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Target returns | 12%+ | 15%+ | 6-8% |
| Leverage ratio | 1.5-2x | 2-3x | 1x |
| Risk-adjusted return | High | Moderate | Moderate |
| Downside protection | 0% floor | 0% floor | 0% floor |
LIFT
Internal Leverage (LIFT) Deep Dive
How LIFT works and its advantages
How LIFT Works
Years 1-2: You pay $100K/year premium
→ Cash value builds to ~$150K
Year 3+: Borrow $50K against cash value
→ Use $50K to fund additional premium
→ Cash value still earns on full $150K
→ New premium adds more growth capacity
Result: Same $200K initial outlay
→ Powers $300K+ of policy growth
→ Both pools compound simultaneously
LIFT Advantages
- No external parties: Everything between you and insurer
- No bank qualification: Your policy is the only underwriting
- Fixed loan rates available: Lock in rates at policy issue
- No margin calls: Policy loans have no due date
- Full control: Adjust leverage at will
LIFT Considerations
- Lower leverage ratio: Typically 1.5-2x vs external's 2-3x
- Returns depend on you: Must fund initial premiums yourself
- Requires engagement: Quarterly monitoring needed
- Not "free money": Loan interest accrues
Kai-Zen
External Leverage (Kai-Zen Style) Deep Dive
How external leverage works and its trade-offs
How External Leverage Works
Years 1-5: You pay premiums ($100K/year = $500K)
Bank simultaneously pays ($100K/year = $500K)
→ $1M total premiums
Years 6-10: Bank continues paying ($500K more)
You stop paying
→ $1.5M total premiums from $500K outlay
Exit: Policy value: ~$3M+
Repay bank: ~$1M (principal + interest)
Net to you: ~$2M+
From $500K investment
External Leverage Advantages
- Higher leverage ratio: 2-3x your capital
- Bank pays for you: After initial period
- Larger death benefit: More premium = more coverage
- Estate planning power: Targets $5M+ estates
External Leverage Considerations
- Bank relationship: Requires qualification
- Variable interest: Bank rates can change
- Higher complexity: Two relationships to manage
- Higher minimums: Usually $100K+ annually
- Exit coordination: Must plan bank repayment
- Potential margin: If policy underperforms significantly
Decision
Decision Framework
Which approach is right for your situation?
Choose LIFT If:
- ✓ Premium capacity: $50K-$200K annually
- ✓ Prefer no external parties
- ✓ Want to control your own leverage
- ✓ Risk tolerance: Moderate (managed risk)
- ✓ Estate size: Under $5M, or prefer flexibility
- ✓ Philosophy: "I'd rather control my own leverage"
Choose External If:
- ✓ Premium capacity: $100K+ with ability to stop after 5 years
- ✓ Estate size: $5M+ where max death benefit is priority
- ✓ Comfortable with bank relationship
- ✓ Want to stop paying after 5 years
- ✓ Want maximum leverage
- ✓ Philosophy: "I want the bank's money working for me"
Choose No Leverage If:
- ✓ Premium capacity: Under $50K annually
- ✓ Simplicity priority: Want "set and forget"
- ✓ Risk tolerance: Conservative
- ✓ Time horizon: Under 10 years
- ✓ Engagement: Minimal advisor interaction
- ✓ Philosophy: "Simple and steady wins the race"
Risk Analysis
Risk Comparison Matrix
How risks compare across strategies
Lapse Risk Scenarios
| Scenario | Internal (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Underperformance 1-2 years | Manageable | Manageable | Minimal impact |
| Underperformance 3-5 years | Adjustment needed | May stress bank relationship | Minor |
| Extended underperformance | De-leverage required | Potential bank action | None |
Interest Rate Risk Scenarios
| Scenario | Internal (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Rates rise 1-2% | Fixed rates protect | Loan costs increase | N/A |
| Rates rise 3%+ | Still protected if fixed | Significant cost increase | N/A |
| Rates invert | Managed, adjustment possible | Bank may adjust terms | N/A |
Our Focus
What We Offer
Our specialization and approach
Our Focus: Internal Leverage (LIFT)
Infinite Wealth Builder specializes in LIFT (internal leverage) because:
- Client control: You're not dependent on bank decisions
- Flexibility: Adjust leverage based on life changes
- Simpler relationships: One advisor, one carrier
- Appropriate for most clients: Works at $50K+ capacity
- Manageable complexity: Less moving parts
We Don't Offer External/Premium Finance
We don't provide Kai-Zen or bank-financed strategies because:
- Higher complexity: More relationships, more risk points
- Bank dependency: Introduces third-party risk
- Higher minimums: Most clients don't need $5M+ strategies
- Our expertise: We've built our practice around internal leverage
If you specifically want external leverage, we can provide referrals to firms that specialize in premium finance strategies.
FAQs
Common Comparisons
Questions we hear frequently
"Is LIFT better than Kai-Zen?"
Neither is universally better. They serve different purposes:
- • LIFT: Better for control, flexibility, moderate leverage
- • Kai-Zen: Better for maximum leverage, large estates, those comfortable with bank relationships
"Is FlexMethod the same as LIFT?"
Similar concept, different implementation. FlexMethod is National Life Group's internal leverage program. LIFT is Infinite Wealth Builder's implementation with proprietary monitoring protocols. Both use internal leverage; execution differs.
"Can I do both?"
Technically possible but rarely recommended. The complexity of managing both internal and external leverage typically isn't worth the marginal benefit for most clients.
"What about premium finance through my own bank?"
Possible but complex. Some clients use their own banking relationships for premium financing. This requires coordination between you, your bank, your carrier, and your advisor. It's essentially DIY external leverage.
Due Diligence
Questions to Ask Any Advisor
Before choosing a leverage strategy
- 1"What type of leverage is this—internal or external?"
- 2"What are the specific risks of this approach?"
- 3"What happens if the policy underperforms for 3+ years?"
- 4"What's the exit strategy?"
- 5"Who else is involved besides you and the insurance company?"
- 6"What are the total costs including all parties?"
- 7"How is ongoing monitoring handled?"
Any advisor should answer these clearly. Vague answers are red flags.
Which Strategy Fits You?
Understanding the landscape is step one. Step two is determining which approach—if any—fits your specific situation. We'll help you understand which approach makes sense, even if the answer is 'none of the above.'