The infinite banking system is a wealth strategy that utilizes dividend-paying, high cash value whole life insurance as an alternative to saving and borrowing with a traditional bank.

What Is Infinite Banking?

 Infinite banking refers to a strategy that allows you to design a tailored financial plan for yourself, and it’s tied to having a whole life insurance policy.

In essence, infinite banking makes use of the cash value of whole life insurance policies – also known as permanent life insurance – to accumulate wealth in the manner of a tax-free cash value account savings account.

  While there are several benefits to using a whole life insurance policy as your private bank, perhaps the two biggest draws are its tax advantages and guaranteed growth compared to a bank savings account, CD, or share certificate. Namely, you can often expect a greater rate of return—plus potential dividends—and you can access this growth without owing taxes.

If it sounds too good to be true, it could be. Most whole life insurance policies aren’t structured to support an infinite banking system, meaning they grow wealth incredibly slowly. The slower your policy accumulates wealth, the less advantageous it is and the longer it takes before you can use your policy to fund purchases, investments, or your retirement. However, with a properly structured policy, reducing reliance on traditional banks and protecting your wealth from market volatility can happen sooner than you think.

How Does Infinite Banking Work?

 Infinite banking works as a financial tool that allows you to save inside of your permanent life insurance policy instead of storing your money in a bank account. In essence you are creating your own repository of cash, that earns a guaranteed rate of interest.

 As such, it’s a perpetual wealth strategy that isn’t correlated to the stock market, high-interest rates, and other disadvantages that come with a traditional bank account or some form of investment.

It allows an average person to become their own personal finance manager and take control of their financial world.

 That said, we want to address a common misconception:

Infinite banking is NOT the same as whole life insurance and it’s not a policy type it’s a concept and it uses life insurance as the vehicle.

 However, as mentioned before, it’s been proven that whole life insurance policies – also known as a type of permanent life insurance – can be utilized for infinite banking most efficiently because of their cash value.

Understanding The Cash Value Of Your Whole Life Policy

 A whole life insurance policy (commonly referred to as a permanent life insurance policy, although it’s a type of it) has a cash value, and it can easily be explained like this:

Your policy’s cash value is actually your policy’s death benefit that the insurance company makes liquid. In other words, it’s the portion of your whole life insurance that earns interest.

 Therefore, the cash value of your whole life policy can be used for policy loans as long as you pay your premiums. The more money you put into your policy each month, the faster you accumulate a greater cash value. You also don’t have to pay taxes for your cash value growth.

 In this regard, whole life insurance differs from term life insurance that only serves to pay your loved ones (i.e., beneficiary) a lump sum death benefit.

On the other hand, whole life insurance covers an individual during their entire life and can be used to withdraw or borrow cash.