Arguably the single most beneficial aspect of Infinite Banking is that it improves your cash flow. You don’t need to go through the hoops of a traditional bank to get a loan; simply request a policy loan from your life insurance company and funds will be made available to you. Whole life insurance coverage is an extremely liquid asset compared to other assets like real estate, stocks, bonds, or qualified plans like your 401(k) or IRA.

Because whole life insurance is liquid, it can make up a valuable part of your financial foundation, acting as your emergency savings. Whether you run into unforeseen medical bills, job loss or costly home repairs, policy loans offer peace of mind. You can even use your insurance policy to pay yourself an income if you decide to go on sabbatical, return to school or take time off work to care for loved ones.

We advocate funding a whole life insurance policy as a savings vehicle before considering other investment strategies like real estate or the stock market as part of our strategy.

Dividend-paying whole life insurance is very low risk and offers you, the policyholder, a great deal of control. The control that Infinite Banking offers can best be grouped into two categories: tax advantages and asset protections.

One of the reasons whole life insurance is ideal for Infinite Banking is how it’s taxed. In addition to tax-free policy loans and tax-free growth of interest and dividends inside your whole life insurance policy, the death benefit of a whole life policy is tax-free to your beneficiary and often is exempt from estate taxes as well.

Whole life insurance policies are non-correlated assets. This is why they work so well as the financial foundation of Infinite Banking. Regardless of what happens in the market (stock, real estate, or otherwise), your insurance policy retains its worth.

Too many individuals are missing this essential volatility buffer that helps protect and grow wealth, instead splitting their money into two buckets: bank accounts and investments. The problem with this approach is that, while money in a bank account is safe, it offers a very low rate of return. Market-based investments grow wealth much faster but are exposed to market fluctuations, making them inherently risky. What if there were a third bucket that offered safety but also moderate, guaranteed returns? Whole life insurance is that third bucket.

Regardless of how diversified you think your portfolio may be, at the end of the day, a market-based investment is a market-based investment. In the event of a market downturn, you lose money. Maybe a lot. Maybe a little. Maybe your value doesn’t decrease but your returns do. With Infinite Banking using properly structured whole life insurance, your returns are guaranteed and your cash value won’t decrease.

Not only is the rate of return on your whole life insurance policy guaranteed, your death benefit and premiums are also guaranteed. These certainties are another reason why properly structured whole life insurance is the ideal tool for Infinite Banking.

Consider other assets, like those associated with your 401(k) or IRA. In the event you pass away with money left in either of these qualified plans, the remaining funds will be passed onto your beneficiary—but first it will be taxed. You can guarantee your beneficiary will receive something but you can’t be certain how much, due to future tax rates.

While there are other types of permanent life insurance, whole life insurance is guaranteed to have the same premium for the duration of the policy. You can be certain your premium won’t increase as you get older. This is invaluable when it comes to setting and achieving your financial goals.

Many individuals rely on Infinite Banking for a tax-free retirement. Because insurance policies are paid for with after-tax dollars, you don’t have to worry about your future tax rate like you would with a 401(k). So long as you utilize the policy loan feature of your whole life policy, you don’t have to pay taxes on the growth of your cash value. Simply fund your retirement with policy loans and your insurance company deducts the outstanding loan from the death benefit after you pass away.

When your retirement funds are linked to market-based investments, running out of money in retirement is a very real and valid concern for millions of Americans. Infinite Banking using properly structured whole life insurance can ensure you won’t run out of money in retirement, because your cash flow won’t be at risk if the market experiences a downturn. For this reason, some individuals opt to stop funding qualified plans like 401(k)s or IRAs all together and rely solely on the Infinite Banking strategy for retirement.

Infinite Banking with whole life insurance is a proven method for building generational wealth, in part because the death benefit is tax-free and generally not subject to estate taxes.

In the case of large estates where federal or state estate taxes may kick in, it’s possible to utilize Infinite Banking inside of an Irrevocable Life Insurance Trust (ILIT). By naming the trust as the policyholder of your whole life insurance policies, even the largest of estates can be eligible for tax advantages that provide significantly more wealth to future generations.

When you use whole life insurance for Infinite Banking, you enter into a private contract between you and your insurance company. This privacy offers certain asset protections not found in other financial vehicles. Although these protections may vary from state to state, they can include protection from asset searches and seizures, protection from judgements and protection from creditors. Plus, any policy loans you utilize won’t affect your credit score.