Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Aug 2, 2021

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The Brief

  • Infinite Banking is the idea of using your whole life insurance policy as a personal bank
  • You can take out loans from the cash value of your whole life insurance policy as long as you pay your premiums
  • The cash value of a whole life insurance policy earns interest and is not taxed

If you have a whole life insurance policy, you may have heard of the Infinite Banking concept. However, you may be unsure of what Infinite Banking is or how it works. You may even be wondering, “Is Infinite Banking a scheme?”

Well, at its simplest form, Infinite Banking is a way of using your whole life insurance policy to grow your wealth.

Instead of relying on traditional banks, Infinite Banking allows people to grow their savings while avoiding high-interest rates on bank loans.

Sound too good to be true? Keep reading below to learn what Infinite Banking is, how whole life insurance factors in, and whether or not it’s a scheme.

But before you do, enter your ZIP code into our free comparison tool above to find affordable life insurance rates near you.

What is Infinite Banking?

Infinite Banking is an idea created by Nelson Nash in the 1980s. So what is Infinite Banking anyway?

Well, Infinite Banking is the idea of growing and maintaining your wealth without having to rely on traditional banking systems.

When you take out a loan for a home or an automobile from the bank, the bank gives you the money upfront but requires you to pay it back with interest.

As long as people have to rely on banks for loans, banks can charge high interest rates without suffering any consequences.

With Infinite Banking, you don’t have to rely on banks for loans or pay fees for managing your accounts. Instead, you grow your money through a whole life insurance policy. Essentially, you get to be your own bank.

Sound like your cup of tea? Compare whole life insurance quotes from several companies to find a policy that works for you.

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How does whole life insurance work in Infinite Banking?

Whole life insurance policies come with a cash value, that is, the amount of your life insurance’s death benefit the insurance company makes liquid to you. If you cancel your policy while still alive, the insurance company would pay you that cash value.

However, as long you continue to pay your whole life insurance premiums on time and in full, you can use the cash value of your policy for personal loans.

The more you pay into it, the more cash value you have access to. Your life insurance policy serves as collateral.

In addition, if you opt for a participating whole life insurance policy instead of a non-participating life insurance policy, you can receive dividends based on the insurance company’s profits.

This will also increase the cash value of your policy.

The way this works with Infinite Banking is instead of putting your money into a savings account, you put your money into a tax-free whole life insurance policy, earn guaranteed interest plus potential dividends, and take out loans whenever you need.

Is Infinite Banking a scheme?

Now that you know how Infinite Banking works, you’re probably thinking it sounds too good to be true. You may be wondering, “is Infinite Banking a scheme?”

While Infinite Banking may be unorthodox, it is not a scheme. However, Infinite Banking requires a little more foresight and thought to manage than a traditional bank account, which is why some people prefer to use traditional banks.

Infinite Banking has been used by many wealthy people to grow their wealth and pass it on to their children. If done right, you can see higher returns than you would with a traditional savings account.

If you’re considering Infinite Banking, compare whole life insurance rates from multiple Infinite Banking companies to find the best deal. We recommend looking at at least three Infinite Banking companies before buying.

Now that you know how Infinite Banking works, start shopping for whole life insurance today.

Enter your ZIP code into our free comparison tool below to buy whole life insurance from providers in your area.