The Infinite Banking Concept Explained – Banking Truths

The infinite banking concept allows individuals to establish their own personal banking system using a properly structured Whole Life insurance policy from a mutual insurance company. Mutual insurance companies, owned by their policyholders, offer guaranteed growth rates of 2-3% and non-guaranteed yearly dividends. In today’s low-interest rate environment, the long-term internal growth rate is approximately 4.5%, but this could increase if interest rates rise.

Dividends can be reinvested into the policy, enhancing the guaranteed cash value and future dividends. The savings component of a Whole Life policy is tax-free as long as the policy remains active until a death claim is paid. Policyholders can use their Whole Life cash value throughout their life and can withdraw their contributions tax-free. However, to access the excess growth tax-free, it must be borrowed instead of withdrawn, allowing the compounding of safe and liquid assets to continue, a crucial aspect of the infinite banking concept.

Funds borrowed can be used to cover major expenses, emergencies, and other investment opportunities without interrupting the compounding process. In essence, a properly structured Whole Life insurance policy from a mutual insurance company can operate similarly to a bank, with both savings and lending capabilities. The key to successful infinite banking with a Whole Life insurance policy is the compounding effect, as borrowing against the policy allows the cash value to continue compounding while still being used for other expenses or investments.