Infinite Banking, also known as "becoming your own banker," is a financial strategy that involves using a properly structured and funded whole life insurance policy as a personal banking system. The concept was popularized by Nelson Nash, a financial advisor and author of the book "Becoming Your Own Banker." In this blog, we will delve into what infinite banking is and how it can benefit you in securing your financial future.
How does it work?
Infinite banking works by utilizing the cash value component of a whole life insurance policy. The cash value can be used for various personal and business expenses, such as paying off debt, financing education or starting a business, and can be accessed through policy loans. Unlike traditional banking options, the interest rate charged on these loans is typically lower and the loan is secured by the policy's cash value, providing a greater level of financial security.
Building Wealth:
One of the key benefits of infinite banking is that it allows you to build wealth over time. As you make premium payments, the cash value of your policy grows, providing you with a source of liquid assets that you can use to meet your financial goals. Additionally, many whole life insurance policies offer dividends, which can be used to increase the policy's cash value or be taken as cash.
Financial Security:
Infinite banking can provide you with a greater level of financial security compared to traditional banking options. As mentioned earlier, policy loans are secured by the policy's cash value, providing a cushion in case of economic uncertainty. Additionally, a properly structured and funded whole life insurance policy can also provide death benefits to your beneficiaries, ensuring that your family is financially secure in the event of your untimely death.
Borrow from the policy: Once the policy's cash value has grown, the policyholder may borrow against the policy for personal or business use. The loan is typically secured by the policy's cash value, and the policyholder may choose to repay the loan or let it accumulate as an outstanding balance, with interest.
Re-borrow from the policy: After repaying the loan, the policyholder may choose to borrow against the policy again, creating a cycle of borrowing and repayment that generates ongoing cash flow.
Monitor and adjust the policy: Regular monitoring and adjusting of the policy is important to ensure that it continues to meet the policyholder's financial goals. This may include adjusting the death benefit, premium payments, or policy loans to reflect changes in the policyholder's financial situation.
It's important to note that "infinite banking" is a complex financial strategy, and it's recommended to seek advice from a financial professional before implementing it. Additionally, the performance of a whole life insurance policy depends on several factors, including the insurance company's financial strength, policyholder's premium payments, and interest rates.
