The amount of time needed depends on your unique situation. ***The more aggressive you fund your policy in the beginning, the quicker you can start borrowing against it. Why?īecause the first several years of coverage typically pay for the cost of insurance (your death benefit) and operational costs like fees and overhead. It covers the insurer’s ass too.Ĭash value takes several years for the money to grow tax-deferred so it’s virtually worthless in the policy’s early years. It pays for the amount of money you’d receive if you gave up your policy and surrender coverage. When you die, the cash value returns to the insurer – not your beneficiaries. Cash value (the investment account within your policy).Ĭash value is separate from your death benefit.
Think of these as the expense ratio of your policy. Fees, overhead, and operational costs.Cost of insurance to cover the death benefit (this is separate from the cash value of your policy).There are three main components that your premiums pay for: It’s a combination of insurance and investing. Cash value policies provide coverage alongside an investment account with a portion of your premiums paying into the investment account. Whole life belongs to the cash value category of life insurance and is what you need when putting the IBC into practice.
Your premiums are fixed and either paid monthly or annually. It’s a policy that stays in effect until you (the insured) die. Whole life insurance is a type of life insurance. However, to understand how the IBC works, you need to understand whole life insurance. Strategic Self-Banking aka Infinite Banking seeks to treat life insurance as an asset with its prime focus on dividend-paying, whole life insurance. It’s been around for centuries but the term gained popularity 20 years ago when Nelson Nash coined it in his book: Becoming Your Own Banker: Unlocking the Infinite Banking Concept. Annual dividend payments through your mutual insurance company.Tax-free growth, loans, and withdrawals.What the IBC advocates is by aggressively saving your money in whole life insurance, you could use that money to fund big-ticket items like a house or college tuition with your policy and not lose money to interest payments. Things like:Īll of the above examples will deplete your wealth over your lifetime in the form of interest payments. The main point of the IBC is that you lose money to creditors on the various loans you take out over your life. The idea behind it advocates becoming your own bank by leveraging your whole life policy for easy access to cash while sidestepping high-interest payments from lenders in the form of loans.
If you’ve ever heard of using your whole life insurance policy (whole life as opposed to term life insurance) like a savings account to borrow against for personal use, then you’ve heard of the Infinite Banking Concept (IBC) – whether you realized it or not.
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