≡ Menu

Customer Reviews
Advertiser Disclosure

Cash Flow Banking Using High Cash Value Whole Life insurance

Fact Checked by Jason Herring & Barry Brooksby
Licensed Agents & Life Insurance Experts.
Insurance and Estates, a strategic life insurance provider composed of life insurance professionals, is committed to integrity in our editorial standards and transparency in how we receive compensation from our insurance partners.
recycling your dollars

With the constant volatility of the stock market, many investors and retirees are looking for alternative sources for growing and protecting their wealth, as well as for funding large purchases and other investments. One alternative is cash flow banking – a strategy that uses properly structured high cash value whole life insurance.

In addition to providing a guaranteed return, tax advantaged growth, and protection of funds in any type of market or economic environment, though, a cash flow banking policy using high cash value whole life insurance offers some additional enticing features, too, such as your own “banking” system where you can quickly and easily access funds for making high-dollar purchases like real estate and business equipment, as well as a tax-free supplement to your retirement income.

Further, unlike traditional investments, because the cash flow banking strategy uses a whole life insurance chassis, the death benefit can provide an additional financial “safety net” for your loved ones and survivors.

But even so, a cash flow banking strategy isn’t the right fit for everyone. So, it is critical to understand the pros and cons of cash flow banking, and whether or not it could be a viable component of your overall financial and retirement plan.

What is Cash Flow Banking and How Did the Concept Come About?

In its most basic sense, cash flow banking refers to a strategy where one saves money and essentially becomes their own bank, similar to the infinite banking concept coined by Nelson Nash. When a whole life insurance policy is structured properly, the cash flow build up can be maximized, and then used for a wide variety of wants and needs.

Because the funds in the cash value account grow tax deferred, it can enhance the compound growth accumulation potential. And, when the whole life insurance policy is purchased from a mutual insurance company, you may also receive dividends – which can add to the tax advantaged growth of your cash value.

You may access the funds from your account 100% tax free at any time via policy loans, and the money can be used for any purpose. Therefore, cash flow banking can increase your liquidity and give you more control over how you use your money.

There are various other names that cash flow banking may go by, including:

  • Infinite banking (or the Infinite Banking Concept – IBC)
  • Family banking concept
  • Bank on Yourself
  • Perpetual wealth strategy
  • Circle of wealth
  • Be Your Own Bank
  • Wealth Accumulation Account
  • CashFlow Hacking
  • CashFlow Tactics

When structured properly, your cash flow bank account does not have to be reported to the IRS. In fact, this type of account is completely outside of the government’s and Wall Street’s control. It is also protected from creditors and lawsuits – including bankruptcy – in most states.

Dividend Paying Whole Life

The vehicle that is used to create a cash flow bank is dividend paying whole life insurance from a mutual insurance company. This type of insurance offers a death benefit and a cash flow component. Whereas many insurance professionals focus primarily on the death benefit coverage, though, cash flow banking specialists use a uniquely structured policy that concentrates more on maximizing the cash value.

Here, the gains in the account are not taxed every year. This differs from personal investments and traditional retirement plans where Uncle Sam “shares” in the profits, in turn, significantly slowing down the growth over time.

Although cash from the whole life insurance policy can be withdrawn, the gains are considered taxable in this case. An alternative is to borrow money from the policy’s cash value, which allows you to access the money tax free.

On top of that, the full amount of the cash value will continue to generate a guaranteed return plus potential dividends. This is because you are actually borrowing from the underlying insurance company and simply using your cash value as collateral, which allows you to earn compounded returns in your policy and in a potential investment that you borrowed against your policy to obtain.

So, as an example, if your policy’s cash value is $100,000 and you borrow $50,000, a return will continue to be generated on the full $100,000 in your cash value account. Given that, the cash flow banking concept allows you to receive two benefits at the same time from the same dollars.

You can enhance the process even further by using a policy loan to purchase other investments – such as real estate or businesses – to recapitalize your cash flow “bank” and repeat the process over and over again.

Social Proof

Cash flow banking is not a new concept. In fact, it has been used for more than a century by some of the wealthiest families and largest corporations in the country, including:

  • McDonald’s
  • Chase
  • AT&T
  • General Electric
  • Disney
  • Wells Fargo
  • Stanford University

It is possible that you have not heard of cash flow banking – even though it has been used successfully for many years. One of the biggest reasons for this is because since the 1970s, financial advisors have focused primarily on the “Wall Street promise” of building wealth with equities (even though this puts your money, and your financial future, at great risk).

Although some of today’s well-known financial “gurus” like Dave Ramsey and Suze Orman tell people to steer clear of whole life insurance, the Wall Street Journal recently reported that the cash flow banking concept “has become a tax shelter for the rich” and that “it gives the affluent tax advantages far beyond those available to middle income people through a 401(k) or IRA.”

And the good news is that you don’t have to be rich in order to take advantage of the cash flow banking concept. Many people get started with an investment as small as just $100-$200 per month. But before you move forward, it is important to understand both the pros and cons of cash flow banking.

Why Investors and Retirees are Turning to the Cash Flow Banking Strategy

As more investors and retirees realize the benefits of using their money while it still continues to generate a guaranteed (and safe) return, many are turning to cash flow banking. That is because cash flow banking can open up a nearly endless list of financial opportunities for you, such as:

  • Enhancing your tax advantaged savings (even if you have already “maxed out” the annual contributions to an IRA and/or employer-sponsored retirement plan)
  • Paying off existing debt
  • Purchasing investment real estate
  • Funding a business (as well as the necessary equipment and/or inventory)
  • Buying a new car
  • Paying college tuition for yourself or a loved one

Some of the key advantages of using the cash flow banking strategy include:

  • Tax-advantaged growth of the cash value
  • Guaranteed return
  • Leverage
  • Non-correlated asset
  • Privacy
  • Protection from creditors (in most states)
  • Improved liquidity and cash flow
  • Tax-free access to cash

Tax Advantaged Growth of the Cash Value

A whole life insurance policy’s cash value grows tax deferred. This means that there is no tax due on the gains each year – and this, in turn, allows the account value to increase exponentially, as the cash generates a return on the premium contributions, as well as on the previous gains, and on the funds that would have otherwise been paid in taxes.

Tax-Deferred vs. Fully Taxable Growth

When dividends are added to the policy’s cash value, these can further enhance the overall growth – especially because dividends are considered a return of premium and are as such received tax-free.

Guaranteed Return

Whole life insurance policies offer several guarantees – including guaranteed cash value accumulation. This is the case, regardless of what happens in the stock market. In addition, the principal and previous gains are also protected from loss.

Some of the other guarantees that whole life insurance also offers include:

  • Guaranteed death benefit – which can provide loved ones with a financial “safety net” for replacing income, paying off debt, or taking care of other needs if the insured passes away
  • Guaranteed fixed premiums – because the whole life premiums do not increase, it is easy to budget for…and the whole life insurance premium amount will not go up, even as the insured ages or if they contract an adverse health condition in the future.


The whole life policy’s death benefit provides a great deal of leverage – particularly because it offers a guaranteed payout to the beneficiaries, even if the insured dies after only one single premium payment has been made. This is not something that is available on “traditional” retirement saving plans like IRAs and 401(k)s.

In addition, life insurance policy beneficiaries receive the death benefit income tax free. Therefore, these recipients will have use of 100% of the proceeds. This is also not the case for retirement plan beneficiaries who must pay taxes (on distributions from traditional IRAs and retirement plans) and are also required to fully liquidate these retirement accounts within just ten years after the account holder’s passing.

To obtain even more leverage with a cash flow banking plan, you could add a term life insurance rider to the whole life policy for added death benefit protection in the early years. That way, your loved ones will still have a financial safety net while you concentrate on maximizing the cash value growth in the base policy.

Non-Correlated Asset

Whole life insurance is considered a non-correlated asset because it is free from the volatility of the stock market and the housing market. This is important because your money will remain safe and stable, and it will continue to grow year after year, no matter what else is going on in the economy.

In addition to the financial security this offers, it can also provide you with peace of mind and the ability to focus on other things without the constant worry about losing your savings in the next stock market correction.


Cash flow banking also offers privacy. With many other asset classes, anyone – including the IRS – can simply do a search and find out what you own. But with life insurance, the policy information is private. Therefore, details about your life insurance holdings do not show up on credit reports or title searches.

As an added bonus, there is also no credit check required before you take a life insurance policy loan. So, this type of borrowing won’t have a negative impact on your credit score, or even show up on your credit report as a “balance” that you have due.

Protection from Creditors

Many U.S. states offer creditor protection for life insurance. Because of that, if you are involved in a lawsuit or other type of financial situation like bankruptcy, the cash value in your policy may be shielded from creditors.

As of early 2023, the states that offer either some or unlimited protection from creditors include:

  • Alabama
  • Arkansas
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • Washington D.C.
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin
  • Wyoming

*Note: You should consult with an attorney if you have any questions regarding creditor protection of life insurance cash value in your state.

Tax-Free Access to Cash

One of the primary benefits of using the cash flow banking concept is the easy and fast access to funds tax-free via policy loans. This money can be used for any purpose. Although you can withdraw money, it is taxable to the extent of the gains.

But the funds that you access through loans are tax-free – regardless of what the then-current tax rates are. In addition, even though the insurance company charges interest on the borrowed funds, all of your money will still continue to generate a return.

Improved Liquidity and Cash Flow

Using cash flow banking, you can significantly improve your liquidity and cash flow. This, in turn, can provide you with faster access to funds that you need for purchases and investment opportunities.

For instance, while you may own some valuable assets, do they all allow you to access cash from them quickly and easily?

Doing so can be difficult with real estate. In this case, if you want to gain access to equity in your home or an investment property, you must qualify for a home equity line of credit or do a “cash out” refinance. Depending on the situation, you might even have to sell the property.

Even with some of the more liquid asset types – like stocks and bonds – it can be risky to pull cash out because you could sell at a bad time, ultimately causing you to incur a loss. But with a whole life insurance policy, you have easy access to your cash value. Typically, all you have to do is contact the insurance company, tell them how much you need, and the funds will be available to you – often within just a few days.

This liquidity can give you some added benefits, too. For example, if you come across an investment where there is a lot of competition to purchase, you could beat out other investors who must find ways to come up with the necessary cash.

Multiple Benefits with the Same Dollars

One of the other big advantages to using cash flow banking is the ability to obtain multiple benefits with the same dollars. As mentioned above, even when you take a policy loan, the full amount of your cash value will continue to generate a return. So, you are actually getting two benefits at the same time with the same dollars.

Plus, if the funds are used for purchasing other cash flowing investments – such as rental real estate – the policy loan can be repaid using the rental income, and you can repeat the process over and over again.

The Pros and Cons of Cash Flow Banking

While there are many advantages to using the cash flow banking strategy, it is also important that you consider all of the various angles to determine whether or not it could truly work for you and your specific objectives.

With that in mind, some of the other factors to consider before you commit to the cash flow banking concept include:

  • Qualification criteria
  • Cost is prohibitive
  • Discipline that is required
  • Cash value is not diversified

Qualification Criteria

First, you have to qualify for a policy. Just like other types of life insurance, whole life requires that the insured qualify based on age and health criteria. Given that, if you have any existing health issues at the time you apply for a policy, it may be more difficult to qualify.

That being said, there are ways that someone could still obtain a policy – even if they have certain health-related conditions. Because not all insurance companies use identical underwriting guidelines, some may be more lenient. It may also be possible to pay a higher amount of premium for the coverage in order to help reduce some of the risk that the insurance company is taking on.

When searching for the right policy, it can help if you work with a cash flow banking specialist who has access to multiple insurance carriers. That way, if there is a health concern, they can guide you towards the right insurer for your specific situation.

Cost is Prohibitive

For some investors, cash flow banking may be cost prohibitive. Even though there is no set minimum monthly amount of premium (other than enough to keep the policy in force), in order to truly maximize the cash value, it is recommended that you put approximately 10% of your income into the plan (or at minimum, $300 per month).

Oftentimes, though, it is possible to “find” the additional funds that you may need. For example, cancelling unused memberships, cutting back on certain services (such as the premium cable television package), or selling unneeded items can typically free up cash that could be redirected into a cash flow banking policy.

Discipline that is Required

It is also important to keep in mind that it can take some time for the cash value in a whole life insurance policy to grow. In addition, when you borrow against the cash value, it is critical that you pay it back. Otherwise, it can slow down the growth and hinder the maximization (as well as possible opportunities going forward). So, in order to truly get the full benefit of cash flow banking, there is some discipline required.

Cash Value is Not Diversified

Another possible drawback of the cash flow banking strategy is that your funds are not diversified – and this goes against what many financial advisors preach. In this case, traditional investing calls for a mix of assets where some that generate gains can help to offset others that may incur losses during a given time period.

However, that being said, there are no losses to your principal – or your previous gains – when you use cash flow banking. So, even though you may have “all of your eggs in one basket” when you use this concept, the value of that basket will continue to generate positive returns without concern about any type of negative movements.

With that in mind, by using the cash flow banking concept, you in many ways are automatically diversifying in order to maximize your policy – as well as your wealth, your liquidity, and your legacy goals.

Pros and Cons of Cash Flow Banking Chart

Cash Flow Banking Advantages Cash Flow Banking Disadvantages
Tax-advantaged growth of the cash value Qualification criteria
Guaranteed return Cost is prohibitive
Leverage Discipline that is required
Non-correlated asset Cash value is not diversified
Protection from creditors
Improved liquidity and cash flow
Tax-free access to cash
Multiple benefits with the same dollars


Is Cash Flow Banking Right for You?

Given the pros and cons of cash flow banking, is this strategy right for you?

Before you make a long term commitment to cash flow banking (or to any other financial tool), it is recommended that you first discuss it with a specialist. That’s where Insurance and Estates can help.

At Insurance and Estates, our mission is to assist our clients with safely growing their wealth, while at the same time having the flexibility and control to use their money for other beneficial purposes.

So, we invite you to contact the Insurance and Estates experts at (877) 787-7558 and talk with one of our specialists in order to learn more about cash flow banking and whether or not it could be a good strategy for you.

0 comments… add one

Leave a Comment