The Infinite Banking Concept is simply a cash flow management system, built on the platform of a dividend paying whole life insurance contract. Why is whole life insurance the chosen vehicle for IBC? The life insurance companies we use have been around for 150+ years and have A rated financial strength. These companies have never experienced any bankruptcies or needed bailed out unlike many banks over that period. We use mutual insurance companies because the policyholders are the owners, not stock holders. This means whenever the company has surplus profits they are shared with the policyholders via a dividend. High Cash Value Life Insurance gives you high liquidity, safety of principal, guaranteed growth, and tax advantages with a properly configured policy.

A crucial component to understanding why the Infinite Banking Concept makes the best financing tool is opportunity cost. When you use money you either pay interest to a bank for a loan, or lose the opportunity to earn interest when you pay cash. This is the opportunity cost of money. An IBC designed policy (High Cash Value Life Insurance) lets you grow your money and deploy capital simultaneously. When you understand this concept, you can recapture lost opportunity cost.

IBC is for anyone looking to take control of their finances and use their money when and however they see fit. This strategy allows people to buy investments, pay for college, or fund any other need while simultaneously saving and building wealth. Even if you are uninsurable, there are ways to start a policy on your husband/wife, kids, or business partner.

First off there are a small number of certified IBC practitioners. Secondly, life insurance companies have always trained agents to sell as much death benefit as possible. IBC goes against the grain of conventional financial planning, because it puts you in control of your money, instead of the banks and wall street. Wall street wants to control your money for as long as possible, and the IBC does not allow for that. It is not in the financial interests of banks and mutual fund advisors to promote the IBC. You may hear Infinite Banking referred to as Bank on Yourself, the 770 account, and investment grade life insurance, all of which are the same.

There are 3 ways to access the capital in your IBC designed policy, which are a sad way, a dumb way, and a smart way. The sad way is you pass away and the death benefit is paid to your beneficiary. The dumb way is to withdraw the money from your policy. The smart way is to take policy loans. This is really a misleading term, because when you take a policy loan, the insurance company lends you their money. You pay annual simple interest then on this money, allowing your money to stay in the policy, compounding and earning interest uninterrupted.

A high cash value life insurance policy is designed to optimize cash value growth. Policies are designed with the maximum allowed cash contributions, and minimum death benefit expenses. This design yields a cash rich policy on day 1 that is a high yielding savings asset, and an ultra liquid financing tool.

A common misconception is that you must pay the full premium every year the rest of your life. In order to keep the policy intact, you only need to pay the base premium and the term rider (if included in policy design). If you want to stop paying the premium entirely, you can either surrender the policy for the cash value, use dividends to pay the premium (premium offset), or convert the policy to a reduced paid up whole life contract. Policies can be funded however long you choose. That may be 1 year, your entire life, or any amount of time in between.

Whole life insurance policies have guaranteed and non-guaranteed values. The life insurance company is contractually bound to the guaranteed values in a policy illustration, as long as you pay your premium. When the company does better than its worst case scenario, they distribute the surplus in earnings through a dividend. This is really just a return of premium, remember they charged you for the worst case scenario, but they had a better year than this, so they distribute back what was overcharged. Dividends are reflected in the non-guaranteed side of a policy illustration. The companies we work with have paid dividends for over 100 years running, even through the great depression, and recession of 2008.

This will be easiest to demonstrate through an example so lets look at the charts below.

Average Rate of Return: 4%

Average Rate of Return: 4%

To find average rate of return you simply take the positive numbers and subtract out the negative numbers to come up with a total (50+50-30-25-25=20), then divide by the number of years (20/5=4). I showed the rate of return in different orders just to prove it’s not a trick. Both cases end with an average rate of return of 4% but had a negative actual rate of return. Actual looks like this:

Actual Rate of Return: 4%

It is a common misconception that if we lose money, we have time to make up for it through many years in the stock market for example. This will help to lessen blows of downturns in the market, but you don’t know when you may need the money in the future, and you definitely can’t predict where the market will be at that same time. These charts help to understand a common misunderstood term in marketing, and teach you what you really need to know, Actual Rate of Return.