Using Life Insurance as Your Own Bank [7 Actionable Steps]

March 5, 2024
Written by: Steven Gibbs | Last Updated on: May 21, 2024
Fact Checked by Jason Herring and Barry Brooksby (licensed 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.

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In our continuing series on the infinite banking concept® we wanted to lay out a framework of how banking with life insurance actually works. If you are already convinced that using life insurance as your own personal bank is the way to go, then please give us a call today for a complimentary strategy session.

Now for you readers who are not yet convinced at the utility of being your own banker, consider the infinite banking pros and cons in light of the following article about using life insurance as your own personal bank.

Becoming Your Own Banker with Life Insurance

Disclaimer: We are not advocating that you are actually creating your own bank or that you are actually becoming a banker.

Rather, we are advocating a concept of taking back control of your money. You want to adopt a new paradigm of thinking, so that you think like a banker thinks and use your personal finances in much the same way that a bank would.

The following 7 step plan to building your own bank using life insurance as your home base will help shed light on how you can find financial freedom and independence away from banks, Wall Street and the rat race prevalent in the USA today.

infinite banking

7 steps to creating your own private banking system:

Prefer to learn by video? Please sign up for our complimentary webinar below. You can also check out our resources for more videos and guides that you can watch and read at your leisure.

Step One: High Cash Value Whole Life

The best vehicle that we have found for an infinite banking strategy is high cash value whole life from a mutual insurance company. This type of dividend paying whole life policy differs from traditional whole life insurance in how the policy is designed. Traditional whole life policies focused on the death benefit. In a policy designed for use as your own bank, the focus is on early high cash value.


The main way this is achieved is by designing the policy so that it is made up of paid up additions versus base premium. The higher the paid up additions, the more early cash value. The most popular whole life policy designs are going to be blends of PUAs/Base of 60/40, 70/30, 80/20, and even 90/10.

paid up additions to base premium

Section 7702

One of the primary benefits of using dividend paying whole life insurance to create your own private banking system is because of the tax advantages provided under IRC section 7702.

Under the code, neither the policy interest accrued or the dividends paid are reported as taxable income. The cash value grows tax deferred and is accessed tax free via policy loans.

As Tom Wheelwright of Rich Dad Advisor fame so eloquently says, the tax code is a series of incentives. And thanks to IRC 7702, cash value life insurance is one such incentive.

Now there are many different carriers in the marketplace that provide good cash value policies. In our experience, choosing a policy from the top dividend paying whole life insurance companies will often be the best choice for a policy designed for infinite banking.

We say often, (but not always), because we at believe that each person is unique and each person has unique goals and objectives.

Often participating whole life will meet those individual goals and objectives, but other times, some type of universal life insurance might be the better fit.

The key is that we assess which company and what policy is the right fit—for you—based on your specific goals and objectives.

Cash value vs Death Benefit

Typically the main goal of an infinite banking policy would be to maximize cash value and minimize the initial death benefit. The reason we do this is so that more of your premium goes into your policy.

That means less commissions for us, the agents.

And that is fine with us, because our goal is to help our clients out and put their needs above our own.

Now some people might want a large death benefit. Know that, while a “banking policy” is not designed to have a large death benefit at first, (over your lifetime it will grow and grow), a larger death benefit can be acquired through one of the life insurance riders discussed next.

Step Two: Life Insurance Riders

Properly designed high cash value whole life insurance may include any or all of the following life insurance riders to maximize cash value at the onset of the policy.

Paid Up Additions Rider

Paid up additions can be defined simply as additional insurance that is paid in full at the time of purchase.

The Paid-Up Additions Rider allows the policyowner to purchase more death benefit and increase the policy’s’ cash value growth.

One way this comes in handy is when the annual dividend offered by participating life insurance companies is used by the policyowner to purchase paid up additions.

Life Insurance Supplement Rider

The Life Insurance Supplement Rider (LISR) blends low cost term life with permanent life insurance. The term life portion goes down as you make your payments, until only permanent life insurance is left.

Additional Life Insurance Rider

The Additional Life Insurance Rider (ALIR) allows the owner of the policy to make increased premium payments in order to purchase additional participating paid up life insurance, increasing the policy’s death benefit and cash value growth.

Term Life Rider

Not to be confused with the LISR above, the Term Life Rider or Renewable Term Rider offers straight up term life insurance that can be, but won’t automatically be, converted to permanent life insurance sometime in the future.

The term life rider is a fantastic option for young adults just starting out who want to practice infinite banking and want a sizeable death benefit to protect their family. because the rider provides additional death benefit coverage that is often converted to permanent coverage down the road.

Guaranteed Insurability Rider

The Guaranteed Insurability Rider (GIR) is not necessarily going to increase your cash value growth initially. Rather, the GIR is a guarantee that you can purchase additional insurance without having to answer health questions or take an exam.

This is a great option when considering life insurance for children as it provides them with an option to increase their coverage down the road.

Step Three: Fund Your “Bank”

Your policy is now set up so you need to fund it, i.e. put money into it. Now the idea is to over-fund your policy right before the point, but not to the point, where the life insurance policy becomes a modified endowment contract, AKA “MEC.”
The IRS has rules that prevent someone from putting too much money into a life insurance policy because such a policy may be seen as a tax haven.

The goal is not to “MEC” the policy. However, we do want to fill it up to the brim with as much cash as possible to maximize early cash value accumulation and growth. That is why we need some or all of the riders listed above, which help us to supercharge your cash value growth right from the start.

And you may qualify for backdating your policy to save age, which allows you to fund the policy with more money in the first year than you normally would be able to.

Step 3 is your “Capitalization” period.

Through the course of time your policy’s cash value will build. In Nelson Nash’s book, Becoming Your Own Banker©, he recommends you spend years in the capitalization phase. Once you have built up enough cash in your policy it is time to put it to use.

The good news is that a properly funded insurance policy will begin to accumulate cash value almost from day one. And depending on how your policy is structured, you should have access to 90%+ of your cash value from the start.

Step Four: Finance Your Purchases

Please note: for a true banking policy to work properly you want to borrow from the policy rather than withdraw money.

When you withdraw, you are depleting your cash value.

But you borrow from the insurance company, using your cash value as collateral, your cash value continues to grow inside your policy.

Financing your purchases is the part of the entire banking on yourself strategy where it gets really fun and why life insurance is a good investment.

You see, as you build up a nice amount of cash in your policy, you are now able to utilize that cash value as collateral through a policy loan.

The company lends you money using your cash value as collateral and in turn, you use the money to do anything you choose.

When you use your cash value as collateral and take out a policy loan, the money in your account continues to grow via compound interest.

The implications of this are that your money is working for you in your policy and your money is also working for you as you use it for various pursuits.

Here are some suggestions on what to do with policy loans:

Buy Cash Flow Assets

The primary asset that come to mind when I think about cash flow is real estate. Real estate can create cash flow and offer additional tax incentives. Now here is where the infinite banking policy really makes sense.

Infinite banking simplified is about loaning yourself money and recapturing that money. As you use your policy loan to make a down payment on an investment property, you can then use your monthly cash flow from the property to pay back your policy loan, with interest.

And don’t cheat yourself here. Charge yourself the current interest rate that a lender would charge you.

As you use your cash flow to pay back your loan with interest, you are increasing your death benefit and cash flow growth.

By doing this you are creating even more opportunity for personal financing down the road, which makes this one of the best real estate wealth building strategies.

Loan Money to Your Business

One quick disclaimer, we are not offering tax advice so please consult a tax professional.

One great way to maximize your cash value is to use the policy loan to loan money to your business. Then have your business pay you back with interest for the loan you made to your business.

You then recapture your own interest and replenish your policy. And your business may be eligible to write off the interest payments, making you even more money. Talk about a win-win!

Purchase Large Ticket Items

Why pay all cash, or worse, finance through a bank, when purchasing large ticket items, such as vehicles or education? Instead, loan yourself the money.

Then recapture the interest that you would have paid a banking institution or that you would have lost had you paid cash and not recouped your money.

And the best part of personal financing is that you are the banker! You get to choose what interest rate you pay yourself back at, if you choose to pay yourself back at all. However, when utilizing the strategy of infinite banking it pays to pay your policy loan back with interest.

Step Five: Recapture Your Money with Interest

[I.E. Put it Back in Your “Bank”]

It takes a disciplined person to implement an infinite banking strategy, especially when it comes to recapturing your principle and interest on your loan.

For those strong willed individuals that can do this part of the strategy the sky is truly the limit on how big your banking policy can get.

Just know that this step is probably the most important step in becoming your own banker. If you don’t pay yourself back, you are basically “stealing the peas” as Nelson Nash would say.

Paying back you loan is a critical step in the process because it is the plan of action that yields amazing returns over your lifetime.

As you continue to build your banking policy, you continue to store up cash that can be utilized for tax fee income via loans.

A Brief Point About Interest Rates

One primary way banks make money is via interest. You deposit your money with a bank and the bank pays you interest, currently somewhere around .49% in most major banks as of June 2023.


The bank takes your money and loans it out for much higher interest. Even if the bank loaned your money for 5% the bank’s profits are 10 times greater than what the bank is paying you. Does a 1,000% return sound good to you?

Now instead of the bank making all the money, you as the borrower, the lender, and the bank, get to make all the money once reserved for banks utilizing the fractional reserve system.

And guess what happens to your life insurance policy once you start recapturing principle and interest? Yep, it grows and grows!

Now, here is another reason to grow you personal “bank”. Life insurance creditor and bankruptcy protection, depending on the state you live in.

If you live in a favorable state, the money in your policy is protected from creditors.

Step Six: Repeat Steps 1-5 Infinitely

After you pay back your policy loan you don’t want your money to sit idle. Instead, you need to repeat steps 1-5 again and again and again. Each time you go through the steps to building your own bank you will have more and more capital to work with.

This is a far cry from parking your money in some government designed fund and putting your life on hold. That is why we consider the 401k plan a scam on certain levels.

Rather, enrich your life in the here and now and start banking on yourself today by employing infinite banking. This will create money momentum, as you focus on being your own banker and keeping your money working for you, rather than always working for money.

Step Seven: Plan Your Estate

We need to add an additional step here because after you entire legacy of wealth building, you will have a sizeable estate to leave behind.

Proper estate planning at this point is critical for passing on as much of your legacy to your family as possible.

There are a myriad of ways to best do this, while you are alive and upon your passing. However, the important thing is to plan ahead so that your family can receive the full extent of your disciplined work.

With your estate in order, your cash value continuing to grow, and a guaranteed death benefit passing to your heirs, you will be in a strong financial position to create a lasting legacy.

Disclaimer: The Infinite Banking Concept® is a registered trademark of Infinite Banking Concepts, LLC. is independent of and is not affiliated with, sponsored by, or endorsed by Infinite Banking Concepts, LLC.

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  • Jay Roe
    Jay Roe

    Is there a way to roll a 401K into an insurance policy with minimal tax penalty?

    • Steven Gibbs
      Steven Gibbs

      Hello Jay,

      Great question, there isn’t a way to “roll” a 401(k) into an insurance policy; however, we do have people that want to pay now vs. facing the tax exposure later. This relates to the “pay taxes on the seed vs the harvest” question. This kind of decisions should be carefully considered with an expert and also perhaps discussed with your tax advisor. There are qualified annuities that you could roll over a 401(k) into, however. If you’re interested, our expert Jason Herring is very experienced in helping people with strategic tax moves and you can request a call from him by emailing

      Best, Steve Gibbs for I&E

      Steven Gibbs is a licensed insurance agent, and the following agent
      license numbers of Steven Gibbs are provided as required by state law:

      Resident License; AZ agent #17508301,
      Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
      LA agent #769583, MA agent #2049963, MN agent #40563357,
      UT agent #655544.

  • Zakee Richardson
    Zakee Richardson

    How long do I have to wait before I can take a loan out for investments.

    • Insurance&Estates

      Your wait time would depend upon your policy design, premiums, etc. To get a concrete idea, you can have illustrations run for your personal scenario. A great start is to connect and request a call with Barry Brooksby at

      Best, Steve Gibbs, for I&E

  • Chuck

    I have a mature term life insurance policy that went from $60.00 a month for 20 years after that it went to $350.00 a month. During this time I went on disability and due to that fact is was able to keep getting the coverage at no cost to me. I have some cash saved in the bank I want to place it in the life Insurance policy to shield it from any court orders for payment a creditors , Leon’s. I live in Mississippi, hypothetically speaking, thanks

    • Insurance&Estates

      Hi Chuck, thanks for connecting. Unfortunately your situation with the expiration of term coverage is all too common based upon some flawed “advice” out there to cash in whole life policies. That said, if you’re looking for creditor protection a good first stop may be an attorney. If you’d like to pursue a policy go ahead and request a call with one of our experts by emailing Barry at

      Best, Steve Gibbs for I&E

  • Darrell V. Salu
    Darrell V. Salu

    Working on saving a lump sum. Looking for an investment opportunity. This makes sense but don’t know anything about life insurance . Would like to connect with someone who could explain it to me in lamens terms and how to get started in something like this. Sincerely thank you so much!!!

    • Insurance&Estates

      Hello Darrell, thanks for connecting. A great first step is to watch any of our webinars at and when you do so, you can access Barry’s calendar to schedule a 1 to 1 call to take next steps.

      Best, Steve Gibbs for I&E

  • Joe

    How do you make “buy investment property” sound like it’s just on the shelf at the corner market? I mean when you purchase a property to make money from, it takes a great amount of work to find a property that is selling under the market value. If you expect to turn a monthly profit immediately off a newly purchased property, then you will never buy a property. So how do you just buy income property so easily? With no money to start with or no income other than what you hope to get?

    • Insurance&Estates

      Hello Joe, when we’re speaking about real estate investment, at this point we are directing the message at active real estate investors. Yes, your point is well taken that acquiring real estate takes discipline and expertise. In the future we may be offering some webinars and training to help folks who want to get started.

      Best, Steve Gibbs for I&E

  • Joe

    I have no money or insurance policy, and no income. Is it possible to obtain a life insurance policy that i can immediately start living off of, and pay for the policy with those living expenses?

    • Insurance&Estates

      Hello Joe, if have you no money that can be tricky and even “high cash value” policies generally need to mature before they provide enough cash to begin paying expenses from. If you can deposit of lump sum initially, your goal may be possible.

      You can with our team of experts by emailing Barry Brooksby at

      Best, Steve Gibbs for I&E

  • Casey Werner

    How do I open a infinite bank account

  • Tyde McIntosh
    Tyde McIntosh

    At some point, assuming there is no plan for legacy, can the cash inside the policy be used to create a tax free income?

    • Insurance&Estates

      Hello Tyde, yes this is a strategy often utilized for LIRP (Life Insurance Retirement Planning) where there are planned distributions (via policy loans) beginning at a certain age. To get illustrations to see exactly how this would work, go ahead and request a call be emailing Barry Brooksby at

      Best, Steve Gibbs for I&E

  • Walter Rauch
    Walter Rauch

    I am seventy four years old. I have a old whole life of 15,000. I was thinking of opening up a life insurance policy, and removing it 10,000 at a time from the stocks, every year. What riders would I need to put in place. And would this be a good Idea now at my age?

    • Insurance&Estates

      Hello Walter, your best first step is to connect with one of our IBC experts to have your policy and situation evaluated in detail. You can connect with Barry Brooksby as a first step by e-mailing him at and I will also forward your request to him.

      Best, Steve Gibbs for I&E

  • Eric

    This seems like one of those things that is good in theory but not in practice. Why? Allocating to a policy with high fees, opportunity cost between policy returns and market returns, risk of income changing when the person first adopts the strategy so they’re not able to meet policy obligations, risk of cash flowing asset not cash flowing as expected etc. Life insurance always sounds good in a vacuum but life is far from that regardless of net worth.

    • Insurance&Estates

      Hello Eric, I’m just responding to caution our readers. Your commentary is typical of those who peddle market based investments as a one size fits all solution. Interesting that you say “life insurance always sounds good” which is untrue. For some people such as the young without families, it doesn’t. You also seem to take as a given that market based returns are “always” preferable to life insurance policy cash value returns which is also untrue due to inherent risk and inherent lack of predictability. When we counsel folks about permanent whole life options, we do not compare the “return” to a market based investments. However, this is irrelevant for the same reason I don’t hail eating vegetables and ridicule drinking water. As an estate planner, my opinion is that folks need both. That said, I can make a strong case that the 20 year moving average nearly always used to tout Wall Street is a misleading approach. How about the cost for mutual funds? In any event, I suggest you be careful with blanket statements that fail to consider the unique circumstances of every person, as I’m assuming you value the concept of being a trusted advisor. As an estate planner, I’ve observed the power of life insurance for many. For these folks, including myself, whole life insurance rises to the top of one’s most valuable assets.

      Best, Steve Gibbs for I&E

  • Eugene

    I’m just learning about the infinite banking potential, but not sure if a whole life policy is out of my budget. It looks like a great way to create security for my family while generating wealth (which also creates security).

    • Insurance&Estates

      Hi Eugene, thank you for you comment and I agree, a powerful safe bucket wealth building vehicle. If you’d like to look more closely it this with our IBC expert Barry Brooksby, go ahead and reach out to him at

      Best, Steve Gibbs, for I&E

  • Ben

    I have a soon to be 8 year old UIL policy, funded with a large single premium. My question is: Can I get one for my wife without triggering MEC?

  • Nicholas A Reed
    Nicholas A Reed

    I have read Nash’s book and maybe I need to go back and look at it again, but I am not sure I understand his examples. He shows a person deposits $5000 a year for the first sevens years for premiums and funding the plan and then takes out a car loan every 4 years and pays that back w/interest but after the 7 years, he shows no premiums being paid. Is that because the dividends are paying the premium along with the interest? I probably need to go back and read it again, but I didn’t understand that.


    • Matthew Hamilton
      Matthew Hamilton

      So the policy illustration you’ve described is most likely a 7 pay policy. So that is to say that the owner would only pay for 7 years. At that time, they want to start taking loans every 4 years. The part that’s murky for me is if when you take a loan, if it opens up the policy for OP or extra repayments, or if you can only put back in what you took out. I’m not sure how your supposed to get extra interest into your policy.

      • Insurance&Estates

        Hello Matthew, I understand your confusion. The short answer is, how much money you can repay to your policy is governed by the MEC limits which are typically calculated by the insurance company annually. So, depending on your policy design and paid up additions contributed each year, you may be able to pay in extra over and above the amount taken as a policy loan. It may be helpful to run some scenarios with our IBC expert Barry Brooksby and you can connect with him at

    • Insurance&Estates

      Hello Nicholas, thanks for your great questions. Your inquiry was forwarded to Jason Herring today; however, please feel free to connect with him at

      Best, I&E

  • Chantal

    Hi. My son is currently overseas serving in the military. I am very much interested in a whole life policy that allows for the infinite banking strategy for him to set him on the right track for when he is ready to invest. Would he be able to start a policy while he is serving? Thanks.

    • Insurance&Estates

      Hello Chantal, thanks for reading and commenting. We’ve forwarded your comment to Jason Herring, so if he hasn’t reached out yet, feel free to connect with him at

      Best, I&E

  • WeFactor

    Thanks for sharing this article. I want to create my own private banking system. This article will surely help me to create it easily. This article is very good and useful site. I’ll definitely follow what you said here.

  • Wilson

    I also think that the important thing is to plan ahead so that your family can receive the full extent of your disciplined work.I also think that by doing this, we can avoid issues as well. Thanks for sharing this article.

    • Insurance&Estates

      Thanks for commenting and we agree that planning ahead is key.

      Best, I&E

  • Ken Chan
    Ken Chan

    Will this strategy work in other countries? I want to do the same thing here in asia.

    • Insurance&Estates

      Hello Ken, there are some possibilities available for folks in other countries. I suggest you connect with Jason Herring if you haven’t already done so. He is available at


      Steve Gibbs for I&E

  • John

    Would my life insurance that I have been paying into in the military for 16yrs work the same way? I am wanting to start my own business and need capital to invest to get started.

    • Insurance&Estates

      Hi John, thanks for reading and commenting. I can’t say for sure what possibilities may be available because we have no knowledge of your military policy. for a more detailed discussion, you can contact Jason Herring at


      Steve Gibbs for I&E

  • Kevin

    If I want to set a policy up to buy a car are there limitations about loan off your policy. Example Could I put 20,000 in today and then loan 17000 tomorrow to pay for a car? Is there a designated time the policy must exist before loaning off of it?

    • Insurance&Estates

      Hi Kevin, great question…the short and general answer is that a policy will need some time to accrue cash value and mature before offering the cash for loan purposes. However, this availability of cash in the policy can be expedited in some cases depending on the strategy. Your example is perhaps a bit ambitious…$20,000 and $17,000 loan tomorrow doesn’t leave much to cover the base and cost of insurance. To put together some actual numbers, I suggest that you follow up with who has substantial expertise in designing IBC policies.

      Best, Steve Gibbs for I&E


    Your method is working for someone like me living overseas?
    I heard many similiar concepts but only people in the US and Canada?

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