Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: Jun 6, 2022

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The Facts of Life

  • Infinite banking, AKA cash flow banking, allows you to borrow against the cash value of a whole life insurance policy.
  • The loan comes out of the insurance company’s general fund and uses your policy as collateral.
  • Choose a permanent life insurance policy that pays dividends to set up the loan.

What is infinite banking? And how do you start using the system?

Infinite banking is a way of using a whole life insurance policy to borrow against if you get into a situation where you would normally have to take out a loan from a traditional bank.

If you’re looking for a way to create your own “bank” that you can invest in and borrow from, infinite banking may be a solution for you. Below, we’ll explore the benefits and disadvantages, so you can more easily make your decision.

If you need help finding a life insurance policy, just enter your ZIP code above to use our free life insurance quote comparison tool.

What is Infinite Banking?

Infinite banking, sometimes called cash flow banking, is a way of setting up a whole life insurance policy (or other type of permanent life insurance) in a way that you can borrow against the cash value of the policy.

If you are looking for a whole life insurance policy, here’s a list of the top 20 insurance companies by market share.

Top 20 Whole Life Insurance Companies by Market Share

Top 20 Whole Life Insurance Companies by Market Share
CompaniesDirect Written PremiumMarket Share
Northwestern Mutual$10,517,115,4526.42%
Metropolitan Group$9,821,445,9536.00%
New York Life$9,925,848,3005.68%
Lincoln National$8,769,303,7745.36%
John Hancock$4,640,905,0172.83%
State Farm$4,633,004,9632.83%
Minnesota Mutual Group$4,422,100,0282.70%
Guardian Life$4,033,541,4012.46%
Pacific Life$3,755,606,2132.29%
AXA Equitable$3,051,945,8491.86%
Voya Financial$2,526,828,2681.54%
Brighthouse Financial$2,519,733,1161.54%
Protective Life$2,403,640,8251.47%
Sammons Enterprises$2,321,529,7221.42%
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How does infinite banking work?

In order to make infinite banking work, all you need to do is call your insurance company and request a policy loan.

This loan, instead of being taken out of your policy, is taken out of the insurance company’s general fund. However, your policy is used as collateral.

You can take out a policy loan for any of the following reasons (plus more):

  • Purchasing a home
  • Purchasing a car
  • Starting a business
  • Education expenses
  • Making investments
  • Family vacations
  • Unexpected expenses

You pay this loan, plus interest, back over a certain period of time. However, if you still owe on this loan upon your passing, the remainder will be deducted from the death benefit.

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What are the benefits of infinite banking?

There are many benefits of infinite banking, including:

  • The policies are non-correlated. This means that your insurance benefits are not tied to the fluctuations of the stock market.
  • Interest rates are generally lower than those of traditional bank loans.
  • You can continue to earn interest even after you borrow. For example, if you purchase a $30,000 policy and want to borrow $5,000, you will still earn interest on the full $30,000.
  • Payback terms are flexible. If you don’t pay back the full loan, the remainder will be taken from your beneficiaries’ death benefit.
  • Policy loans are tax-free income.
  • It is a liquid investment.You can use your cash values at any age for an emergency, an investment opportunity, or income for early retirement.

With that being said, using infinite banking does have its disadvantages as well.

What are the disadvantages of infinite banking?

The main disadvantage is the cost of the premiums for a whole life insurance policy (compared to term life insurance) that is set up specifically for an infinite banking system.

Some experts will recommend that individuals dedicate 10 percent of their income to their life insurance. In an emergency, such as the loss of a job, individuals must be prepared to continue paying their premiums.

It is also a long-term commitment, since you’ll need to continue funding the value of your policy in order to borrow and make the system worth it.

Another (more minor) consideration is whether or not you can be approved for a whole life insurance policy.

How do you set up infinite banking?

To begin setting up your system, you should research and contact some infinite banking insurance companies. Some of these may be well-known life insurance companies, while others may specialize in infinite banking.

You should choose a permanent life insurance (whole life insurance is recommended) policy that pays dividends. It may also be best to add a paid-up addition rider.

While this rider may increase your premiums, it makes it so most of your premium is increasing the cash value of your policy rather than the death benefit.

That’s it! Now, you can begin building up the cash value of your policy and your own personally-owned “bank”.

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How do you find infinite banking life insurance?

The best way to find the right life insurance policy for you is to contact an independent life insurance agent. You may also want to search for an agent that specializes in infinite banking life insurance.

However, some agents do not have their securities license, so you must beware of those agents that attempt to find alternative solutions, such as overfunding a life insurance policy.

Always compare quotes from various companies to make sure you are getting the best price for your policy.

Is infinite banking right for you?

Because these life insurance policies can be so expensive, the infinite banking system may not be the best solution for individuals who are not already wealthy. These individuals may be better off saving, borrowing, and investing the traditional way.

However, for those who have enough money to consistently afford the high premiums, it could be a good long-term solution for creating some financial freedom for their family.

As with any life insurance policy, you must qualify for an infinite banking policy.This means that if you have existing health problems, it might be harder for you to qualify for a policy. 

Bottom Line

Infinite banking is a concept that lets you become your own bank by leveraging the value of a dividend-paying permanent life insurance policy. Developed by economist Nelson Nash in the 1980s, infinite banking gives you the freedom to access your policy’s cash value by borrowing from yourself — and paying yourself back — at any time. Imagine never having to worry about a credit check, high-interest payments or having to apply for a car or student loan ever again — this could be a reality via infinite banking. 

Being your own banker can be a useful financial strategy on your path to financial independence. Take a closer look at how the Infinite Banking Concept, or IBC, works.

Use our free tool to compare life insurance quotes by entering your ZIP code below.