Infinite banking is a financial strategy that involves using a specially designed whole life insurance policy as a personal banking system. The concept is based on the idea that by borrowing against the cash value of a whole life insurance policy, an individual can access funds for various purposes while maintaining the growth and value of the policy over time.
The strategy involves purchasing a whole life insurance policy from a mutual insurance company that pays dividends to policyholders. These dividends can be reinvested in the policy or taken as cash. As the policyholder pays premiums, the cash value of the policy grows, and they can borrow against this cash value at a low interest rate, typically lower than traditional bank loans.
The borrowed funds can be used for any purpose, such as purchasing a home, starting a business, or paying for education. As the policyholder repays the loan, the cash value of the policy increases, and the policy continues to grow over time.
The idea behind infinite banking is that by using a whole life insurance policy as a banking system, individuals can access funds while also building long-term wealth through the growth of the policy. Additionally, the strategy provides tax benefits as the cash value of a whole life insurance policy grows tax-deferred and can be accessed tax-free through policy loans.
However, it is important to note that infinite banking may not be suitable for everyone, and individuals should carefully consider the risks and benefits before implementing this strategy. It is also important to work with a financial professional who is experienced in infinite banking to ensure that the strategy is properly executed.