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Infinite Banking Concept

Infinite Banking with Whole Life
Insurance Quotes 2 Day Team

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

 10 minute read

The Infinite Banking Concept enables individuals, families, and businesses to develop financial independence by becoming your own banker. This concept was implemented by R. Nelson Nash in the early 1980s when he was dealing with unfavorable interest rates on several commercial loans.  Let’s discuss the basics and which companies we recommend using for your Infinite Banking Plan.

The story is that Mr. Nash experienced an epiphany when he suddenly realized that he could use cash value in Whole Life insurance policies to create a group of banks that would be his personal funding vehicles and allow him to take control over all of his financing.

Not only did Mr. Nash resolve his funding challenges, but he also went on to create the Nelson Nash Institute, whose mission is to educate others on taking control of their finances and reclaim the banking function from outsiders who typically do not put their client’s interests first and foremost.

Let us break Infinite Banking down for you and help you get your plan started.

Infinite Banking Concept – 6 Steps to Forming Your Bank

To become your own banker, the simplest and most logical method to provide funding is with whole life insurance. While addressing and completing the following steps for opening your bank, it’s very important to develop a mindset where you think like a banker thinks while using your personal finances just like your neighborhood bank would:

Step 1: Use cash-value whole life insurance

The first step in your banking journey involves capitalization. No, you do not need to find investors or borrow from friends and family. You need to properly fund a whole life insurance policy that can begin accumulating cash value very early in the process. The time it takes to capitalize on your bank depends on the available funds that you will invest in your insurance policy. This process can take several years, but when your policy (bank) becomes properly funded, you will have immediate access to your cash value.

It’s important that you use one of the top infinite banking companies.  We recommend participating whole life insurance provided by a mutual insurer in order to earn more on your interest than the minimum interest rate your insurer will be charging you to borrow against your policy. Fortunately, IRC section 7702 provides that the interest accrued in your policy and the dividends you receive are not taxable. This allows your cash value to grow rapidly so that you can access your cash value tax-free when needed through policy loans. For this reason, you will want to use a top dividend-paying Life Insurance Company when you open your bank.

Finally, you must understand your life insurance policy is for maximizing cash accumulation, so the death benefit should be minimized. If a large death benefit is very important to you, add a term insurance rider at a much lower cost.

Step 2: Riders to Consider

Various riders will be offered to help you broaden your coverage and add more “living benefits” to your whole life insurance policy. Here are some riders you should discuss with your agent:

  • Paid-Up Additions – Paid-up additions are life insurance that is paid in full at the moment of purchase. This rider allows the policyholder to contribute additional premiums and boost the cash value growth in the policy. A great method for adding these paid-up additions is to use the dividends paid each year by the insurer.
  • Life Insurance Supplement Rider – The supplement rider allows the policyholder to combine affordable term insurance with the permanent life insurance in the policy. As you pay your premiums, the term portion of the coverage is reduced until only permanent life insurance remains.
  • Guaranteed Insurability Rider – The GIR provides the applicant the ability to purchase additional life insurance without proof of insurability. This rider is very useful if your circumstances change and you realize you require more life insurance but have developed some health issues.
  • Term Life Rider – The term life rider allows the policyholder to purchase term life insurance that can be converted to permanent insurance later. It is an especially good option for young adults who want to start infinite banking but typically don’t have the budget to purchase a sizeable death benefit.

Step 3: Fund your personal bank

Now that your policy is set up, you have to fund it by paying the premium. The strategy here is to fund your policy just short of it becoming a modified endowment contract or MEC.  If you overfund your insurance policy and allow it to become a MEC, the IRS will treat your policy just like an investment, and all loans and withdrawals would be taxable. This defeats the purpose of using life insurance for banking.

Step 4: Borrow from your policy to finance your purchases

This is the point where you become your own banker. For your personal banking policy to work correctly, you should borrow your cash value rather than “withdraw” it. When you make withdrawals from a life insurance policy, the cash value is depleted by the amount of the withdrawal. In contrast, when you borrow from your policy (your bank), your cash value account continues to grow for you.

When you take a loan against your insurance policy, the insurance company makes the loan, and your cash value is the collateral. The best thing is that although a portion of your account has been collateralized, the entire cash value continues to earn interest on a compounded basis. The best news is, now that you are banking with yourself, you can use the money for any reason you choose.

Step 5: Recapture your money with interest

This is the greatest part about becoming your own banker, but you must remain diligent when it comes to recapturing the interest and principal on your loans.

Here’s how bankers get rich on the backs of their customers. When you earn money, you need to keep it somewhere safe. Most people deposit their hard-earned money at a local bank that not only charges you a fee but pays a ridiculously small amount of interest on your deposit. Your bank then lends your money to other customers and charges them way more interest than they pay you. Between the fees they are charging and the interest they are earning, no wonder so many banks do so well.

But what if you can become the bank, the lender, and the borrower? You get to borrow from yourself and then recapture those funds and the interest by becoming your own banker. Imagine what will happen to your cash value life insurance once you start recapturing the principle and interest on loans you make to yourself. Your bank grows and grows and grows.

Step 6: Rinse and repeat

With step six, you only need to repeat the bank-building process over and over again. Imagine having a half-dozen personal banks that you can access whenever an opportunity arises. You will have the resources you need for buying opportunities, investing opportunities, and other purchases, for that matter, because it’s your bank!

How to set up Infinite Banking and become your own banker

If you are considering the Infinite Banking concept so that you can finance major purchases with your own money, check out the following recommended guidelines to get your bank up and running:

  • It’s never too early to create your savings account to fund an infinite banking system. Your premiums are based on factors like your age and health, so it makes sense to get life insurance while you’re still young and healthy. Once your policy is issued, your premiums are locked in, so you can rest assured that you’re prepared for the future.

  • Select a mutual insurance company with a great reputation for paying dividends on whole life insurance policies. (We’ll help with your selection later in the article)

  • It helps to purchase a policy that is “non-direct recognition” so that policy loans will not impact your dividends.

  • Always elect to receive dividends as paid-up additions, which creates additional “mini-policies” that will also earn interest and dividends. Doing so helps your bank receive funding sooner.

  • Don’t forget to add the “cash value” rider to your policy so that your designated beneficiaries will receive the death benefit PLUS the cash value of your life insurance policy.

  • Borrow money from your bank when you need it! There’s no credit check, and you can use the funds for any purpose. It’s quick and easy to get the cash you need from your infinite banking plan.

  • It’s important to make a plan to repay your bank loan. Although you’re not required to repay the loan, it’s beneficial to do so because the insurance company will charge interest on the loan balance (usually lower than banks and credit cards). Additionally, the death benefit will be reduced by the amount of any outstanding loans.

The benefits of becoming your own banker

Certainly, you can imagine how becoming your own banker can benefit you financially. Simply put, it removes financial restraints that many must deal with regularly.

  • You are in control – Now that you’ve taken over the banking responsibilities for yourself, you remain in charge and in control. Outside influences do not get to share in or profit from your transactions.
  • Privacy – In many cases, your financial transactions in the outside world find their way into the public domain. In fact, the three credit bureaus can determine who you can borrow from, the amount of interest you pay, and the amount of the loan or credit line. Having and using your own private banking system allows for a virtual firewall from all third parties who want to keep track of your business dealings.
  • Reducing interest charges – Most people are concerned about the amount of interest banks and credit card companies are allowed to charge, not to mention the various fees for certain services like overdraft protection or late fees. Since you now own your banking system and are assuming the role of the borrower and the lender, you get to control the interest you once paid to an outside lender.
  • Supplement your retirement – You can use your cash value to fund retirement income tax-free.
  • You can help others with your personal banking system – Most people will admit that helping others is the easiest way to make yourself happy. Becoming your own banker and implementing the infinite banking concept allows you to help anyone financially.

For example, your newly married daughter and husband struggle with traditional lenders to purchase their first home. Here is the perfect opportunity for Mom and Dad to step in and save the day. Using your network of personal banks, you can lend them the money to buy that dream home and eliminate all the aggravating hoops they were being forced to jump through. You make the loan and then set the terms and conditions that are favorable for both parties. And, most importantly, you get to be your little girl’s White Knight!

  • What red tape? – When you become your own banker and assume the role of borrower and lender, there is no more red tape!

What the naysayers say about Infinite Banking Concept

History tells us that many people have issues seeing a product or service that is not “mainstream” or “traditional.”  Just consider the internet, and you have all the proof you need. Most people embraced it early on, but many people considered it as dangerous as voodoo simply because they could not wrap their heads around how the concept worked. We see the same pushback with the Infinite Banking Concept. Here are some typical things we hear from the naysayers:

“I refuse to pay interest when I borrow my own money.”

The easy answer here is that you are not borrowing your money. You are getting a loan from the insurance company, not your cash value account. It is a simple process that takes only a few days to complete the transaction. Since you are borrowing “against” your cash value, there is no lengthy application. There are no restrictions on how you use the money, there is no repayment schedule because you aren’t required to pay it back, and your cash value continues to earn interest and dividends.

Since the insurer is making you a loan from its general operating account, the company expects to earn interest on that money so they can pay death claims. Also, since you are paying interest to a mutual insurance company that is owned by its policyholders, the interest the company collects from borrowers will ultimately find its way back to the policyholders in the form of dividends.

“I can get a lower interest rate from a bank than an insurer will charge for a loan.”

The interest rate charged for your policy loan is generally variable and based on the bond index your particular policy loan is linked to. It is laid out clearly in the insurance policy documents. Because of how the rates are typically calculated, they tend to lag behind the current market rates. So then, when current rates are relatively low, the rates on policy loans are a little higher, but when the current market rates are running high, the interest on policy loans is generally low.

It’s also a good idea to consider other loan acquisition costs associated with a traditional loan. There can be broker fees, rate lock fees, and various others that tend to increase what seems to be the lowest interest rate available. For example, when offered zero percent financing on a new vehicle, do you think the lender is shelling out money with no chance of a return? More than likely, the cost of the zero interest rate is built into the price of the vehicle.

Is an Infinite Banking System right for me?

Infinite banking may not be the best option for everyone, but it can be a great way to build long-term wealth for those who can afford the high premiums and meet the eligibility requirements. 

Whole life insurance policies can be expensive compared to other types of life insurance, so individuals who have a tight budget or are not in good health may not be ideal candidates for this strategy. However, for those who can afford the premiums and qualify for a standard or better risk classification, infinite banking can be a powerful tool for building financial security.

Becoming your own bank can be a great way to build up cash value, but it takes time and commitment to make it work. You’ll need to be dedicated to the process for a few years to see success.

How can I start my Infinite Banking Plan?

Ready to take control of your financial future and start your journey with Infinite Banking today? This powerful strategy transforms how you manage and grow your wealth, using a safe and guaranteed foundation of whole life insurance. With Infinite Banking, you’re not just saving; you’re strategically positioning your money to work for you, offering both security and opportunity for growth. Don’t let traditional banking limits hold back your financial potential. Embrace a world of financial freedom and empowerment. It’s time to make your money work smarter, not harder.

You can get started by using the Infinite Banking calculator on this page.


We certainly hope this article helped you get an idea of how becoming your own banker will allow you to take control of your finances, whether personal or business. We encourage you to contact us for more information about the infinite banking concept and whether it will benefit you, your family, or your business. You can reach us at 1-800-712-8519.

Frequently Asked Questions

What is Infinite Banking?

the infinite banking concept

Infinite banking is concept where an individual or business uses the cash accumulation in a whole life insurance policy as funding for major purchases rather than using commercial lenders. Using this concept, the policyholder is able to recapture the interest fees associated with a commercial loan and at the same time, provide a death benefit for a beneficiary.

Which type of life insurance is used for Infinite Banking?

It’s important that you use participating life insurance provided by a mutual insurer in order to earn more on your interest than the minimum interest rate your insurer will be charging you to borrow against your policy. Fortunately, IRC section 7702 provides that the interest accrued in your policy and the dividends you receive are not considered taxable income.

What's the main benefit of Infinite Banking?

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The main benefit with the infinite banking concept is that you are in control of your lending needs. Instead of paying a lender interest and fees for individual and business loans, you can borrow the money from your insurance policy (your cash value) and determine the interest and repayment schedule. All of this can be done while you have permanent life insurance coverage.

author avatar
Doug Mitchell, CLU Independant Advisor
Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent almost 30 years in the life insurance industry and has also held licenses to sell securities, long-term care insurance and home and auto insurance. Doug is a Top of the Table Million Dollar Round Table member (MDRT).  MDRT is a global, independent association of the world's leading life insurance advisors.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table. He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award. Later in his career with New York Life he was an Executive Council Member. Doug currently serves as President of Ogletree Financial, a managing general agency serving life insurance agents and clients in all parts of the United States. Today, Doug’s main focus is servicing 1000s of policyholders and growing the agency through the reach of