Frequently Asked Questions

What is the Infinite Banking Concept using dividend-paying whole life insurance?

• The Infinite Banking Concept is a strategy that allows you to use a specially designed whole life insurance policy to create your own private banking system. You build cash value within the policy, borrow against it, and maintain control over your finances while the policy earns guaranteed interest and potential dividends.​

How does the Infinite Banking Concept differ from traditional banking?

• With traditional banking, you borrow from external institutions and pay interest on loans. In the Infinite Banking Concept, you borrow against your own policy’s cash value, paying simple interest (if paid annually) to the insurer, while the policy continues to earn its contractually guaranteed interest. This gives you control over your money and eliminates the need to pay excessive external interest to banks.

What are the tax advantages of the Infinite Banking Concept?

• Policy loans are generally tax-free and the growth of the cash value in your policy is tax-deferred.  The death benefit can also be paid out income tax-free to your beneficiaries further creating long-term tax advantages.

Is the Infinite Banking Concept risky?

• The Infinite Banking Concept using whole life insurance is generally considered a low-risk strategy because of the guaranteed cash value growth and the incredible track record and stability of very large mutual insurance companies.  However, there is risk the form of improperly managing policy loans so being "an honest banker" and paying them back is important to avoid reducing your death benefit.

How do policy loans work in the Infinite Banking Concept?

• You can borrow against the cash value of your policy without question, with favorable interest rates, and with no set repayment schedule.  The interest is simple if paid annually but will compound if left unpaid.  The interest you pay goes to the insurance company, not back into your policy.

What happens if I don’t repay a policy loan?

• If you don’t repay a policy loan, the unpaid balance will accrue interest and any policy amount plus interest accumulated will be deducted from the policy's death benefit.  However, there’s no requirement to pay it back on a specific schedule offering incredible flexibility within your finances.

Is the Infinite Banking Concept only for wealthy individuals?

• No, the Infinite Banking Concept is suitable for anyone looking to more efficiently store, grow and protect their hard-earned dollars, build long-term wealth, and gain financial control through disciplined premium payments.

How does the cash value grow in a whole life policy in the Infinite Banking Concept?

• Cash value grows through contractually guaranteed annual interest and likely dividends, as well.  While dividends are not guaranteed, they are typically awarded based on the historical performance of the insurer and can contribute to the policy’s cash value growth and future death benefit amount.

Can I access my cash value anytime I need it through the Infinite Banking Concept?

• Yes, you can access your cash value via policy loans for any reason, including emergencies, large purchases, or investments.  The process is typically very quick, does not require credit checks and does not ding your credit score.

Can I use the Infinite Banking Concept to finance my business?

• Yes, absolutely!  Many entrepreneurs use the Infinite Banking Concept to finance business expenses, such as startup costs, inventory, and equipment purchases.  The ability to borrow against your own cash value gives you the liquidity and flexibility to invest in your business while simultaneously growing your cash value.

How does the Infinite Banking Concept help with retirement?

• The Infinite Banking Concept can serve as a supplemental retirement strategy by accumulating tax-deferred wealth, providing liquidity, and creating a source of tax-free income using policy loans and dividend distributions (tax-free up to cost basis/total amount of premiums paid in).  It also offers a financial buffer and protection from market volatility as well as provides a legacy benefit through its death benefit.

How does the Infinite Banking Concept work in practice?  Can you give an example?

• Example 1:  You take a policy loan to purchase a car.  You continue to earn guaranteed interest on the cash value as well as a high likelihood of dividend crediting even though you borrowed against it.  The interest you pay on the loan is going to the insurer but it's likely much less than you'd pay for traditional financing and you retain control over the asset and the loan terms.

• Example 2:  You use a policy loan to finance your child’s education. The cash value in your policy continues to grow while you pay for tuition with policy loans that have no rigid repayment schedule while the policy continues to provide long-term growth and protection for your retirement and legacy.

What are the main misconceptions about the Infinite Banking Concept?

• The most common misconception about the Infinite Banking Concept is that whole life insurance has "low rates of return" (which, ~4-5% lifetime returns are very respectable!) but the reality is that IBC is not about the rates of return....it's about control, guaranteed growth, protection, efficiency and the ability to reduce the amount of interest one pays others over time. 

• Another common misconception is that it’s too complicated or expensive.  In reality, the strategy is quite flexible and can work for individuals with varying incomes. 

• Another myth is that you lose money when you take out a policy loan.  In fact, the policy continues to earn guaranteed interest and potential dividends, so you’re not losing out on the growth of your policy.

What if I don’t need a large policy?  Is the Infinite Banking Concept still worth it?

• Yes, even with smaller policies, you can benefit from tax-deferred growth, flexible loan access, and wealth-building opportunities.  It’s about optimizing and protecting your financial strategy over time.

Can I convert my current life insurance policy into one for the Infinite Banking Concept?

• Yes, many existing whole life policies can be restructured or exchanged (i.e. 1035 exchange) to work for the Infinite Banking Concept.  You’ll need to work with an advisor to ensure your policy meets your specific financial goals.

How does the death benefit work in the Infinite Banking Concept?

• The death benefit is paid out income tax-free to your beneficiaries.  If you have an outstanding loan, the loan balance plus any accumulated interest will be deducted from the death benefit ensuring your family still receives the value of the policy.

Why isn’t everyone using the Infinite Banking Concept?

• While the concept is growing in popularity, it’s very much still misunderstood.  People don’t always realize the long-term benefits of building cash value, earning guaranteed growth, and accessing flexible loans for personal or business needs.

What is the cost of the Infinite Banking Concept?

• The main cost of the Infinite Banking Concept is the premium payments which are higher than term life insurance but fund both your lifetime insurance coverage and the growing cash value. The plethora of additional benefits far outweigh the initial costs for many policyholders.

Is the Infinite Banking Concept regulated?

• The concept of IBC is not but the product used to facilitate the Infinite Banking Concept, dividend paying whole life insurance, is regulated by State insurance departments to ensure consumer protection and the stability of policyholder benefits.