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Infinite Banking [How You Can Regain Control of Your Financial Life]

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.
infinite banking concept

Infinite banking has been practiced for over 100 years but the term “infinite banking concept” was coined by Nelson Nash in his book Becoming Your Own Banker.

Infinite banking can be defined by the strategy of using your life insurance as your bank, via dividend paying whole life insurance through a mutual insurance company.

In the following article we will focus on how infinite banking can be utilized to create financial freedom for anyone, from the entrepreneur, to the real estate investor, to the husband and wife just starting a family.

Google It

Do a quick Google search for the term infinite banking concept and you will find a wide range of topics and articles on the subject. However, the key is differentiating between articles written by people that actually implement infinite banking and people who simply bash it without any experience or application of the concept.

We have many articles on the subject, including our top 10 list that covers the pros and cons of the infinite banking concept.

The main knock you will find against the concept is that it utilizes whole life insurance.

In fact, most critiques end up being an attack against whole life insurance and not really about infinite banking at all.

Poor Returns?

And top of the list for attacks against whole life is it supposedly poor returns. One reason is because they compare whole life vs stocks. However, stocks are an investment that carry with it a great deal of risk, whereas whole life is a savings vehicle that offers guaranteed, consistent returns.

What all critiques of IBC fail to consider is what the returns of a whole life policy are in conjunction with self banking. When you factor in whole life guaranteed returns plus private banking, your returns can skyrocket.

You see, when you use cash value life insurance in conjunction with the infinite banking concept you supercharge your financial health, taking back control of your financial well being as a good steward of your finances should. Your returns are only limited by your own financial imagination, which will increase as you start to think as a banker and not a borrower.

Your returns are only limited by your own financial imagination, which will increase as you start to think as a banker and not a borrower.



The Vehicle: Whole Life

The fact is, participating whole life insurance has respectable returns, particularly when you factor in the fact that minimum returns are GUARANTEED.

Add in to the return equation the truth that returns can be accessed income TAX FREE and you start to see that whole life might actually be a good investment, or at the very least, it is a great forced savings account, earning a much higher savings rate than you will find with a bank.


Now, as you do your due diligence into the concept you will surely come across articles that call infinite banking a scam. These articles miss the mark since they focus on the product (i.e. whole life) with very little knowledge (if any) of the actual concept.

Besides, there is no scam here. The key is to fund a properly designed policy to achieve early high cash value growth versus an initially high death benefit.

How IBC works.

So, here is how infinite banking works. You are your own banker, using your life insurance policy as your bank. Instead of financing a purchase or paying cash, you borrow against your life insurance policy’s cash value.

Through the use of life insurance loans, you bank on yourself with this strategy that replaces institutional banks with you now as the bank. You act as your own banker, essentially wearing two hats as both the borrower and lender. And this process opens your mind up to limitless financial possibilities.

Some of the benefits of using whole life insurance for infinite banking include:

1. Cash Flow

Your policy’s cash surrender value is liquid and accessible by you whenever you need it. You do not have to go through a qualification process. You can withdraw funds or take a loan from the insurance company using your cash value as collateral.

2. Tax Benefits

You can access your cash tax free up to your basis. You can take a loan and not pay taxes. And your interest gained in your policy is tax deferred, meaning you have tax free growth on your principle. Finally, your death benefit goes to your beneficiary income tax free.

3. Fixed Premiums

Unlike other permanent life insurance types, whole life insurance premiums are fixed. The primary advantage of fixed insurance premiums is you don’t have to be concerned that your policy will be underfunded as you age as your policy’s cost of insurance increases.

4. Guarantees

Your whole life policy offers a guaranteed rate of return of between 3-4%. Now, compare this to the average savings rate offered by commercial banks.

In addition, although not guaranteed, you also receive an annual dividend. The consistent, guaranteed return offered by dividend paying whole life is a great benefit vs keeping your money in a commercial bank and earning very little return.

In addition, whole life insurance is private, does not interfere with your ability to qualify for loans, including student loans and includes creditor protection in many states.

You can go here to view our life insurance creditor protection by state table to see if you are in a creditor protection favored state.

Infinite Banking Example

Here is an infinite banking example.

Step 1

The first step is to overfund life insurance through the use of a properly designed policy that maximizes early high cash value growth. You have now started your own personal banking system.

Step 2

Step 2 is letting your policy build cash value. Now, you can access your cash value right away to start practicing infinite banking. However, during the capitalization phase you ideally want to give your infinite banking policy a year or two to build cash value before you begin to implement your plan.

Step 3

Step 3 is paying attention to different investments that interest you. You might be into real estate or your interest might lie with oil, dividend paying stocks or even cryptocurrency. Whatever investment you want to pursue, pay particular attention to the market and the opportunities provided.

Step 3 may also entail paying off existing debt. You may have begun this journey in bad debt, i.e. debt that takes money out of your pocket. Focusing on getting out of bad debt ASAP will free your finances up so you can start taking on some good debt, i.e. the type of debt that puts money into your pocket.

Finally, Step 3 may also entail using your policy to finance large ticket item purchases, such as a home, vehicle, business equipment, etc. Remember, you wear two hats, the lender and the borrower. Rather than borrow money from a bank, you borrow from your own personal bank (i.e. life insurance cash value). Now it is your job to set the repayment terms and pay back your loan to yourself.

Step 4

Step 4 starts when you pinpoint an opportunity and borrow against your cash value to purchase your investment, use towards a down payment, or to finance a large ticket item.

Perhaps you want to invest in real estate using infinite banking. You locate a great investment property. Using your cash value, you take out a loan and use the cash to make a down payment on the home.

Ideally, you use your cash and other people’s money to create leverage, and increase your return on investment.

Simultaneously, your cash is still in your policy earning interest. You can choose a direct vs non direct recognition policy. Either way, the insurance company is crediting interest and dividend to your total cash value balance, even though you have an outstanding policy loan. Therefore, your money is at work in two places at once, within your policy and in your investment.

Therefore, your money is at work in two places at once, within your policy and in your investment.

Step 5

Step 5 is using your investment to pay back your life insurance loan. Suppose your investment property provides $500 a month in cash flow. You can use this cash flow to repay you loan to your bank (i.e. life insurance policy).

Step 6

Step 6 is repeating the process again and again as opportunities arise. But in the meantime your money is being put to work in your bank, earning a guaranteed interest rate in a true compound interest rate account.

Increasing Death Benefit

On a side note, as you grow your cash value, your death benefit is also growing, making a whole life policy great inflation protection, as our government continues to debase our currency thanks in part to the fractional reserve banking system.

Velocity of Money

One of the principles behind infinite banking is the velocity of money. Rather than put your money into a 401k jail, you are constantly using your money to create wealth. And the more you familiarize yourself with the benefits of keeping your money moving, the more prosperous you become.

And this velocity is why making the claim that the infinite banking concept is simply whole life insurance misses the boat entirely. The whole life insurance policy is simply the best tool or vehicle that provides the necessary utility to practice infinite banking. It is a means and not an end.

Rather, the end is continuing to build and grow your bank to achieve your ultimate human life value. As you grow your cash value, your death benefit also grows, ensuring your legacy for generations to come.

For more on infinite banking, please check out our infinite banking wiki article that goes deeper into the topic and explores the thinking and economics behind the strategy.


So there you have it, a hopefully easy to grasp explanation of infinite banking. The next step would be to request our free guide, the self banking blueprint or to give us a call and speak to an advisor today.

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