Here’s what you aren’t understanding about Infinite Banking.

Building anything of lasting value begins with a solid foundation—the basics. While Infinite Banking may seem like a complex strategy reserved for the ultra-wealthy, its core principles are surprisingly straightforward when broken down.

At its essence, Infinite Banking is a financial strategy that leverages specially designed whole life insurance policies to create what the book calls “a personal banking system”. I have to note for compliance that you aren’t creating an actual bank on the corner with cash machines and tellers etc. This is a figurative “bank” or pool of capital that you can use as your bank.

You’re not building an actual BMO or RBC bank; you’re building a pile of money that you can use to invest or fund your business or life.

I just have to get that out of the way because we’ve had some people get heated in the comments that infinite banking isn’t literally creating an actual chartered bank.

What does it really mean to “become your own bank”? How does this strategy empower you to take control of your finances, build wealth, and eliminate reliance on traditional lenders?

To answer these questions, let’s simplify the process by exploring the 6 foundational principles of Infinite Banking. Whether you’re a business owner, an investor, or someone looking to take charge of your financial future, these principles are the key to unlocking the benefits of Infinite Banking. Let’s dive in!

Leveraging Whole Life Insurance Policies

The first problem people have with the infinite banking concept is that it’s based on a whole life insurance policy and people already have a whole bunch of opinions about whole life insurance.

The easiest criticism to make is that whole life insurance costs more than term insurance. And this is true. But just because something is a different price, it doesn’t mean it’s a bad thing. Canadians have been safely buying whole life insurance policies for more than 150 years – there must be something to it.

The big thing with the whole life policies that you use for infinite banking is that they need to be designed in a certain way – which is not the way traditional advisors are taught to set them up. It’s very counter-intuitive to traditional training to properly set up an infinite banking policy because we are maximizing for cash value growth and most people don’t do that.

So that’s big problem #1 – it costs more so obviously it’s a terrible idea and nobody should do it.

What Makes a Whole Life Policy “Specially Designed”?

Whole life insurance policies come with 2 parts to the account. The first, you get the life insurance which most people understand. When you pass away, this will pay out to your beneficiaries. The other part is a cash value account that grows over time with a dividend that’s paid from the insurance company’s participating account.

The traditional way to set up whole life policies, and the way most advisors are trained – is to maximize the total death benefit of the policy and have some cash values there as a side benefit. When you’re setting up a policy the infinite banking way, you actually do the opposite. You try to make the cash values as big as possible, as fast as possible.

Traditionally set up whole life policies might not have any cash values build up in the first few years – sometimes even in the first 10 years. The way we set up these policies, we can get you anywhere from 70% – 90% of your cash values in year 1.

What does that mean?  For example if you are depositing $100,000 annually into one of these policies, we can get you $75,000 – $90,000 cash values after the first year which is huge.

Of course this will depend on a bunch of things like the insurance company you are working with, your age, your health and your actual life insurance amount needed. Having this early available cash value lets you use the policy right away for your business, for investing or for your life.As you pay additional premiums in the following years, your cash values will build up bigger and more quickly.

The way we set them up, you’ll also have your break-even point or cross-over point more quickly – often within 2 – 4 years. This means if you deposited $400,000 over  the last 4 years you would have $400,000 or more available to you.

Most advisors don’t set up the policies this way. I’d hazard to say a lot of advisors don’t even know how to set up policies this way.

Now as you build up this cash value over time, it continues to grow by receiving a dividend from the insurance company’s participating account. This year it’s between 5% – 6.5% depending on the company you’re working with.

This focus on building high cash values quickly is what cash value makes these policies a cornerstone of the Infinite Banking strategy. Enabling you to become your own banker and gain greater financial control of your life.

Uninterrupted Compound Interest

The biggest advantage of this Infinite Banking Concept is its ability to have uninterrupted compound interest growth. It helps you grow wealth while maintaining control of your money.

Now, what is uninterrupted compound interest?

I’ll start with the opposite. If you have money invested in the stock market and you want to buy something using that money, you have to sell the investment and cash it out of the investment account to spend.

This interrupts your compounding growth because you took the money out of the system to spend.

With the infinite banking concept, you never take the money out of the account and the compounding growth never stops for your entire life.

When you want to use your money to spend on something, you leverage against the cash values of the policy and spend or invest the loaned money.

The benefit is that these whole life insurance policies let you access your cash value without halting its growth.

With Infinite Banking, you don’t have to choose between saving or spending. You can do both at the same time. As long as you are doing it correctly and taking policy loans or collateral loans and not withdrawing from the cash value, you can use your loan to invest in business ventures or stocks or anything that you believe will allow it to grow while at the same time the cash value within your policy continues to compound from that total amount.

Maximize Your Cash Value

The goal of these policies is simple: maximize your cash value growth.  And then use that cash value as security for loans that you invest or spend.

Over time, your policy’s cash value grows steadily, increasing your borrowing power and making the policy an ever-more valuable financial tool.

So, to maximize your cash value:

Pay regular premiums: Consistently fund your policy to build cash value.

Keep the policy in force: These are called whole life insurance policies – the goal is to keep them for your whole life until you pass away.

Pay for the correct amount of insurance: Your policy should have the correct structure so that the insurance policy is built to maximize your savings potential.

Borrowing Instead of Withdrawing

As I briefly mentioned before when talking about compound growth, when your policy’s cash value grows, you can borrow against it using policy loans from the insurance company or collateral loans from a bank.

Unlike withdrawing funds, borrowing allows your money to stay in the policy and continue compounding.

This approach is like borrowing from your own private bank. You don’t have to go through a lengthy process to get a loan from your insurance company. You request the amount, and it arrives within a couple days, keeping your cash value very liquid.

And you can use the cash value to:

• Fund investments.
• Cover major expenses like education or home repairs.
• Pursue personal goals.

It doesn’t necessarily have to be an investment in the sense of it making you more money, maybe you want to do some renovations and need enough cash to make a payment quickly.

The key here is to Commit to Repaying Yourself.

You’ll read silly comments online like “why would I pay myself back” which is the wrong thinking. As Nelson Nash, the creator of Infinite Banking, famously said: “Don’t steal the peas.” When you borrow from your policy, treat it like a loan from a traditional bank.

Repay it, with interest, there is interest.  Repay yourself as if you were repaying a bank. Treat it seriously. Some salesy people online try to promote infinite banking and say that you don’t have to repay the loans – which is sort of technically true, but also a really bad idea.

When you have your cash value and you take a loan, pay it back so you can do it again and again and again. You’ll notice I said “interest”. A lot of people who tout Infinite Banking try to gloss over this and deniers of the strategy use it as a “gotcha” that there’s interest like they’ve discovered some dark secret.

It’s a policy loan. There is interest. Nobody here is hiding that. Take the loan, use the money, pay it back. Repeat. Neglecting to repay yourself undermines the system and slows your wealth-building potential.

Create a Cycle

You want to get in the habit of using the policy and repaying it. I think of mine like a line of credit. Borrow against your policy’s cash value for a financial need. Use the funds to invest, pay for expenses, or achieve a goal. Repay yourself to replenish the cash value.

Repeat the process as needed.

This creates a self-sustaining financial cycle that lets you save, spend, and grow wealth more easily. With every repayment and investment, your “bank” grows stronger.

Final Thoughts

These principles will help simplify your thought process about Infinite Banking. A lot of people think it’s complicated, if you’ve started this policy with us then refer back to this in times of confusion or reach out and we can help.

We’ve been doing this for a long time and have a great process in place to get to the core of your current situation and your goals and concerns. We use this information to make up a plan that’s specially customized for you and your family and business situation.

We’re also pretty direct and honest in how we do business – so if we feel that the infinite banking strategy is not a good idea for you, we will let you know. We’re not trying to dupe anybody into working with us or to try and sell to everyone who reaches out online.

Contact Us for More Information

If you’re a Canadian looking to explore the infinite banking strategy further and understand how it can work for you we invite you to reach out. Fill out the contact form below, and we’ll be happy to answer any questions you may have and provide personalized advice based on your unique situation.

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