Infinite Banking (Explained)

Infinite banking is a finance strategy that has more questions than answers. The gist of infinite banking is getting a loan from your life insurance company that uses your death benefit as collateral.

Our guide will tell you everything you need to know about the infinite banking life insurance strategy. Also, we’ll talk about infinite banking benefits and disadvantages.

Although there aren’t any infinite banking insurance companies, there are plenty of companies with permanent life insurance where you use this concept.

If you want to skip the infinite banking concept and find a life insurance company near you, enter your ZIP code in the FREE online quote tool above. Is infinite banking a scam? We answer this and other questions below.

What is infinite banking?

The infinite banking system is a wealth strategy where a policyholder borrows money from a whole life insurance policy using their death benefit as collateral. As long as you’re making payments, you can borrow money from your life insurance company.

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How did infinite banking get started?

The infinite banking concept was founded by Nelson Nash. The retired Army National Guard veteran was a life insurance agent for 35 years. Nash discovered this concept when he was thinking of ways to shift more financial independence to the consumer.

Where can you use infinite banking strategies?

You can use infinite banking strategies with life insurance companies. If you’re looking for the best life insurance companies, start with the top 20 whole life insurance companies. See them below.

Top 20 Whole Life Insurance Companies by Market Share

These companies have the highest U.S. market share in the life insurance industry. The direct premiums reflect all the life insurance premiums collected from customers.

Infinite banking can work for you, but you have to accumulate some measure of money and time before a life insurance company allows you to borrow large sums of money. Each company is different, so ask questions before you decide to buy a whole life insurance policy.

How does infinite banking work?

Looking for an infinite banking example? If you want to use the infinite banking strategy with a whole life insurance policy, your payments must be current. If you pass away, the beneficiary can receive the payout minus whatever you owe to the life insurance company.

If you paid your debt, however, no money will be taken from the death benefit.

The beneficiary can take the payout or use the method you did before you passed away. The beneficiary can repeat this cycle for future beneficiaries, turning it into a never-ending cycle of policyholder and beneficiary.

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What are the pros and cons of infinite banking?

Although infinite banking sounds like an excellent investment idea to purchase real estate or for other needs, there are some hiccups.

It wouldn’t be fair to you if we didn’t talk about what could go wrong with infinite banking disadvantages. Explore the next few subsections to learn more.

What are the infinite banking advantages?

First, let’s look at the benefits you can receive from infinite banking strategies with whole life insurance.

• You can skip credit checks and loan applications when you borrow money against your death benefit.
• Infinite banking loans are tax-free.
• You’ll earn interest even if you borrow against the coverage amount (death benefit).
• Life insurance benefits are not affected by the stock market.
• Payments are flexible

Move on to the next section to find out about infinite banking drawbacks.

What are the infinite banking disadvantages?

Here’s another list of items that show the disadvantages of infinite banking.

• Whole life insurance policies set for infinite banking strategies are more expensive than average term life insurance quotes.
• You’ll need to set aside 10 percent of your income for life insurance.
• Payments are still required even if you lose your job.
• You need to get approval from a life insurance company for a whole life insurance policy.
• Life insurance rates will increase as you get older.

It’s tempting to ask a life insurance company for this policy because of the financial flexibility, but it takes careful planning.

If you want a more cost-efficient life insurance policy, whole life insurance isn’t what you want. Term life policy is about $13 per month, but whole life insurance is at least $85 per month.

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Can the average person use infinite banking?

The short answer is yes. However, infinite banking comes with an expensive monthly payment. If you’re not ready to at least put up 10 percent of your annual income into your life insurance policy, try a different life insurance policy and another financial strategy.

Case Studies: Exploring Infinite Banking

Case Study 1: The Smith Family

The Smith family, consisting of John and Sarah Smith and their two children, was looking for a way to build wealth and create a financial safety net. They decided to explore the concept of infinite banking and opted for a whole life insurance policy that allowed them to leverage their death benefit as collateral.

By utilizing this strategy, they were able to secure a loan from the life insurance company to fund their children’s education expenses. The Smiths found comfort in knowing that their policy’s death benefit would continue to provide financial security for their family, even with the loan in place.

Case Study 2: Entrepreneurial Endeavors

Jennifer, a budding entrepreneur, was seeking a source of capital to start her own business. Instead of approaching traditional lenders or investors, she turned to infinite banking as a means of financing her entrepreneurial endeavors.

By leveraging her whole life insurance policy, Jennifer was able to obtain a loan from the insurance company and launch her business without giving up equity or facing strict borrowing requirements. This approach provided her with greater flexibility and control over her financial future.

Case Study 3: Retirement Planning

Mark and Lisa, a couple nearing retirement age, were concerned about having enough savings to support their desired lifestyle during their golden years. They decided to incorporate infinite banking into their retirement planning strategy.

By accumulating cash value in their whole life insurance policies over several years, they were able to access loans that supplemented their retirement income. This approach provided them with a tax-efficient source of funds and peace of mind knowing that their life insurance policy would continue to protect their family’s financial well-being.

Case Study 4: Real Estate Investments

Tom, an experienced real estate investor, recognized the potential of using infinite banking to fuel his property acquisitions. By utilizing his whole life insurance policy’s cash value, Tom was able to secure loans to finance down payments on investment properties.

This strategy allowed him to capitalize on opportunities in the real estate market while maintaining a steady growth in his life insurance policy’s death benefit. Tom understood the risks involved in borrowing against his policy and carefully managed his investments to ensure positive cash flow banking.

Infinite Banking: What’s the bottom line?

People who have extra money to spend should think about using infinite banking strategies to ensure wealth. The infinite banking strategy helps clear debt using the death benefits of your whole life insurance policy.

If whole life insurance doesn’t agree with your budget, there are other types of term life insurance and permanent life insurance out there. When you come into a higher income bracket, you can pursue whole life insurance using the infinite banking concept.

Ready to buy life insurance? Enter your ZIP code in the FREE comparison tool below to find affordable life insurance companies in your area that have whole life insurance with infinite banking capabilities.

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