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 cascade leverage—a series of strategically stacked IUL policies where Policy A funds Policy B, which funds Policy C. This creates multiplied growth across multiple policies without bank involvement. Kai-Zen uses external leverage—bank loans fund your premiums in a 50/50 split arrangement, requiring bank qualification and $5M+ estate typically. LIFT targets 12%+ returns through policy stacking with no loan exposure; Kai-Zen targets 15%+ with 2-3x bank leverage. LIFT offers simplicity and control; Kai-Zen provides higher leverage but more complexity and third-party risk.
At a Glance
| LIFT MapPinIcon Return | 12%+ |
| Kai-Zen MapPinIcon Return | 15%+ |
| LIFT Min Premium | $50K/year |
| Kai-Zen Min Premium | $100K+/year |
Categories
Three Types of IUL Leverage
Leveraged IUL strategies fall into three distinct categories based on their structure
Cascade Leverage
Definition: A series of strategically stacked IUL policies where each policy funds the next
How it works:
- Policy A is funded and grows
- Policy A funds the premiums for Policy B
- Policy B funds the premiums for Policy C
- Each layer compounds on the previous
- Death benefits stack for maximum coverage
Brand name:
- • LIFT (Infinite Wealth Builder)
KeyIcon characteristic: Multiple policies working together—growth multiplies across layers.
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:
- • Velocity of Money strategies
- • Duplifunding / Hyperfunding
KeyIcon characteristic: Single policy leveraging itself—everything stays within one 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)
KeyIcon characteristic: Involves third-party bank relationship with separate underwriting.
Comparison
Head-to-Head Comparison
Detailed comparison across all key factors
Core Mechanics
| Factor | Cascade (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Leverage source | Stacked policies | Bank loans | None |
| External parties | None | Bank | None |
| Underwriting | Insurance only (per policy) | Insurance + bank | Insurance only |
| Structure | Policy A → B → C cascade | Commercial loan | Single policy |
| Interest rate | N/A | Variable (bank) | N/A |
| Margin calls | Never | Possible | N/A |
Qualification Requirements
| Factor | Cascade (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 | Policies only | Policy + possibly more | None |
Risk Profile
| Risk Factor | Cascade (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Lapse risk | Moderate (managed) | Moderate | Low |
| Bank relationship risk | None | Yes | None |
| Policy coordination | Multiple policies to monitor | Single policy + bank | Single policy |
| Forced liquidation | Never | Possible | Never |
| Complexity | Moderate | High | Low |
Return Potential
| Metric | Cascade (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| MapPinIcon returns | 12%+ | 15%+ | 6-8% |
| Leverage mechanism | Stacked policies | 2-3x bank leverage | 1x |
| Risk-adjusted return | High | Moderate | Moderate |
| Downside protection | 0% floor (each policy) | 0% floor | 0% floor |
LIFT
Cascade Leverage (LIFT) Deep Dive
How LIFT's policy stacking works
How LIFT Works
Policy A: You fund $100K/year
→ Cash value builds, death benefit grows
Policy B: Funded by Policy A
→ Additional layer of growth and protection
→ Policy A continues growing independently
Policy C: Funded by Policy B
→ Third layer of compounding
→ All policies continue growing
Result: One premium stream
→ Powers multiple policies
→ Stacked death benefits
→ Multiplicative growth potential
LIFT Advantages
- Multiplicative growth: Each layer compounds independently
- Stacked death benefits: Multiple policies = multiple payouts
- No bank relationship: Everything through insurance carriers
- Controlled scaling: Add layers as capacity allows
- Downside protection: 0% floor on each policy
LIFT Considerations
- Higher minimums: $50K+ annual premium typically required
- Multiple policies: More complexity to manage
- Long time horizon: 10+ years for full effect
- Requires engagement: Quarterly monitoring across policies
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 bank involvement
- ✓ Want multiplicative growth through stacked policies
- ✓ Risk tolerance: Moderate (managed across layers)
- ✓ Value stacked death benefits for family protection
- ✓ Philosophy: "I want my policies to work together"
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 | Cascade (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 | Reduce cascade layers | Potential bank action | None |
Interest Rate Risk Scenarios
| Scenario | Cascade (LIFT) | External (Kai-Zen) | No Leverage |
|---|---|---|---|
| Rates rise 1-2% | No loan exposure | Loan costs increase | N/A |
| Rates rise 3%+ | No loan exposure | Significant cost increase | N/A |
| Rates invert | Minimal impact | Bank may adjust terms | N/A |
Our Focus
What We Offer
Our specialization and approach
Our Focus: Cascade Leverage (LIFT)
Infinite Wealth Builder specializes in LIFT (cascade leverage) because:
- Multiplicative growth: Stacked policies compound together
- Client control: You're not dependent on bank decisions
- Stacked protection: Multiple death benefits for your family
- Appropriate for most clients: Works at $50K+ capacity
- No loan exposure: Policies fund each other, not borrowing against yourself
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 cascade leverage (LIFT)
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
"What makes LIFT different from internal leverage?"
They're fundamentally different approaches. Internal leverage borrows against a single policy's cash value to fund more premiums. LIFT uses cascade leverage—multiple policies stacked where each funds the next. This creates multiplicative growth across layers rather than leveraging a single pool.
"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.'