A wealth building block is my name for a regular bill that you run through your cash value life insurance policy instead of paying it straight out of checking. You put the money you'd set aside for the bill into the policy first. When the bill comes due, you borrow against the policy to pay it. Then you pay the loan back on the same schedule you'd have used to save up for the bill. I ran the numbers on this over 30 years in a video on how wealth building blocks work.
Most money set aside for a bill waits in checking until the due date, and while it waits, it does one job. Routed through the policy, the same dollars sit as cash value, and a well-designed whole life policy credits that cash value with guaranteed growth plus dividends. Borrowing against cash value doesn't pull the money out of the policy. The insurance company lends you its money and holds your cash value as collateral, so the cash value keeps getting credited while the loan is out. Some policies credit the borrowed portion at a different rate, so ask how yours handles it. One dollar ends up doing two jobs: it's saved for the bill, and it's growing in the meantime.
Car insurance was one of the first examples I used, because almost everyone pays it. Many insurance companies charge a little more to pay monthly, sometimes a few dollars a month, and some give a discount for paying six months or a year up front. Say your premium runs $600 every six months. You put $600 into the policy once. When the bill comes due, you borrow $600 against the policy, pay the full six months, and get whatever discount the company gives for paying in full. Then you pay the policy back $100 a month, which is what you'd have been setting aside anyway. Six months later, the money is back in the policy, ready to borrow for the next bill.
Health insurance works too, even though there's usually no discount for paying ahead. Say your premium is $400 a month. That $400 goes into the policy once, and from then on each month's premium is paid with a policy loan that your next paycheck pays back.
The deposit happens once for each building block. A viewer emailed me about this, using tuition as his example, and asked whether he'd have to put new money in every year. He doesn't. He puts the tuition money in the policy once, borrows it to pay the tuition, and pays the loan back over the school year. The next year, the same money is there to borrow again. That first deposit goes in as extra premium on top of your regular premium, which also moves the policy closer to its full funding level. Keep it under the MEC limit, which means the most a policy can take for its death benefit before it becomes a modified endowment contract and loans lose their tax-free treatment.
The loan does cost interest, though less than the rate suggests. Policy loan interest is charged for the days the money is actually out. Some carriers bill it in advance to your policy anniversary, but it's still figured on the balance day by day. Since you're paying the loan down steadily, the balance averages about half of what you borrowed. On a 6% policy loan, that works out to about 3% of the bill. Your own loan rate depends on your carrier and your policy.
Plenty of bills can work this way. The list can include car payments or saving for your next car, car insurance, health insurance, tuition and textbooks, your phone and internet, utilities, property taxes if you can get them out of your mortgage's escrow account, a tax bill you know is coming, business taxes, a fund for the next roof, vacations, and the holidays. Anything you already set money aside for is a candidate. Buying your next car through your policy walks through the biggest one step by step.
This isn't a get-rich-quick move. Each building block is one brick, and the payoff comes from stacking them for 20 or 30 years. It only works if you pay each loan back on schedule. A policy loan reduces your cash value and death benefit while it's outstanding, and interest you don't pay gets added to the balance. Putting the premium on autopilot covers how to automate the payments so they happen without a reminder.
It also takes a policy designed for high early cash value. That means a small base with most of the premium going to paid-up additions, which are extra premium dollars that buy small pieces of paid-up insurance and show up as cash value quickly. A policy with little cash value in its first years can't lend you the money for a building block yet. Base premium vs. paid-up additions explains that mix. Money from a policy loan usually takes a couple of days to reach checking, so request each loan a few days before the bill is due. I'm a licensed insurance broker, dividends aren't guaranteed, and illustrations are projections, not promises.
Pick one bill you already save up for, like a six-month premium or a tuition payment. The next time you'd set money aside for it, put that money in the policy instead, and write down the payback schedule before you take the first loan.