Infinite Banking Explained

Infinite banking is the concept of borrowing money from a whole life insurance policy while using your death benefit as collateral. Despite the benefits from infinite banking, there are several disadvantages, such as higher-than-average life insurance rates.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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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: May 12, 2022

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Quick Facts

  • Nelson Nash founded the infinite banking concept.
  • Infinite banking encourages you to borrow money against your whole life insurance death benefits to pay off debt, purchase real estate, or start a business.
  • Whole life insurance policies equipped with infinite banking possibilities are more expensive than term life insurance rates.

Infinite banking is a finance strategy that has more questions than answers. The gist of infinite banking is getting a loan from your life insurance company that uses your death benefit as collateral.

Our guide will tell you everything you need to know about the infinite banking life insurance strategy. Also, we’ll talk about infinite banking benefits and disadvantages.

Although there aren’t any infinite banking insurance companies, there are plenty of companies with permanent life insurance where you use this concept.

If you want to skip the infinite banking concept and find a life insurance company near you, enter your ZIP code in the FREE online quote tool above. Is infinite banking a scam? We answer this and other questions below.

What is infinite banking?

The infinite banking system is a wealth strategy where a policyholder borrows money from a whole life insurance policy using their death benefit as collateral. As long as you’re making payments, you can borrow money from your life insurance company.

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How did infinite banking get started?

The infinite banking concept was founded by Nelson Nash. The retired Army National Guard veteran was a life insurance agent for 35 years. Nash discovered this concept when he was thinking of ways to shift more financial independence to the consumer.

Where can you use infinite banking strategies?

You can use infinite banking strategies with life insurance companies. If you’re looking for the best life insurance companies, start with the top 20 whole life insurance companies. See them below.

Top 20 Whole Life Insurance Companies by Market Share
CompaniesDirect Written PremiumsMarket 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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These companies have the highest U.S. market share in the life insurance industry. The direct premiums reflect all the life insurance premiums collected from customers.

Infinite banking can work for you, but you have to accumulate some measure of money and time before a life insurance company allows you to borrow large sums of money. Each company is different, so ask questions before you decide to buy a whole life insurance policy.

How does infinite banking work?

Looking for an infinite banking example? If you want to use the infinite banking strategy with a whole life insurance policy, your payments must be current. If you pass away, the beneficiary can receive the payout minus whatever you owe to the life insurance company.

If you paid your debt, however, no money will be taken from the death benefit.

The beneficiary can take the payout or use the method you did before you passed away. The beneficiary can repeat this cycle for future beneficiaries, turning it into a never-ending cycle of policyholder and beneficiary.

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What are the pros and cons of infinite banking?

Although infinite banking sounds like an excellent investment idea to purchase real estate or for other needs, there are some hiccups.

It wouldn’t be fair to you if we didn’t talk about what could go wrong with infinite banking disadvantages. Explore the next few subsections to learn more.

What are the infinite banking advantages?

First, let’s look at the benefits you can receive from infinite banking strategies with whole life insurance.

  • You can skip credit checks and loan applications when you borrow money against your death benefit.
  • Infinite banking loans are tax-free.
  • You’ll earn interest even if you borrow against the coverage amount (death benefit).
  • Life insurance benefits are not affected by the stock market.
  • Payments are flexible

Move on to the next section to find out about infinite banking drawbacks.

What are the infinite banking disadvantages?

Here’s another list of items that show the disadvantages of infinite banking.

  • Whole life insurance policies set for infinite banking strategies are more expensive than average term life insurance quotes.
  • You’ll need to set aside 10 percent of your income for life insurance.
  • Payments are still required even if you lose your job.
  • You need to get approval from a life insurance company for a whole life insurance policy.
  • Life insurance rates will increase as you get older.

It’s tempting to ask a life insurance company for this policy because of the financial flexibility, but it takes careful planning.

If you want a more cost-efficient life insurance policy, whole life insurance isn’t what you want. Term life policy is about $13 per month, but whole life insurance is at least $85 per month.

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Can the average person use infinite banking?

The short answer is yes. However, infinite banking comes with an expensive monthly payment. If you’re not ready to at least put up 10 percent of your annual income into your life insurance policy, try a different life insurance policy and another financial strategy.

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Infinite Banking: What’s the bottom line?

People who have extra money to spend should think about using infinite banking strategies to ensure wealth. The infinite banking strategy helps clear debt using the death benefits of your whole life insurance policy.

If whole life insurance doesn’t agree with your budget, there are other types of term life insurance and permanent life insurance out there. When you come into a higher income bracket, you can pursue whole life insurance using the infinite banking concept.

Ready to buy life insurance? Enter your ZIP code in the FREE comparison tool below to find affordable life insurance companies in your area that have whole life insurance with infinite banking capabilities.

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