Be Your Own Bank is another way to refer to Nelson Nash’s Infinite Banking Concept: Becoming Your Own Bankerยฎ. To be your own bank means you replace conventional thinking and take back control of your money outside of Wall Street, using a properly structured whole life insurance policy designed to maximize cash value growth.
In the following article we will discuss how you can be your own bank and the advantages and disadvantages of being your own banker, as well as look at the benefits of whole life insurance and why it makes such a great self banking system. (Please follow the links in this article for more information on the topic of being your own banker.)
Infinite Banking: Secrets to Becoming Your Own Banker
How to Be Your Own Banker
Step 1: Research
To be your own bank does NOT mean you are actually creating a bank. Rather, to be your own bank signifies a huge paradigm shift in your thinking that puts you in the control seat of your money, rather than Wall Street, as you put on your banker’s hat and start to think like a banker does. Check out our IBC Pros and Cons article and our IBC Wiki article for a deeper dive into infinite banking and how to be your own banker.
Step 2: Choose An Asset
The second step on your way to becoming your own banker is choosing a financial asset from which to be your own bank. When it comes to being your own banker, specific financial vehicles work better than others. And that is why an infinite banking policy using properly structured dividend paying whole life insurance, built to maximize cash value growth, is the optimal vehicle to use for an infinite banking strategy. These high cash value whole life policies are a foundational asset to your private banking system.
Step 3: Build Your Bank
The third step is to have an expert design your whole life insurance banking policy. To get the most out of your banking policy you need to have the proper mix of base premium and paid up additions, with term insurance blended in. This is not a traditional whole life insurance policy but a high cash value whole life insurance policy that focuses on cash value accumulation and growth. These policies allow you to access your cash value within the first 30 days of setting them up and provide access to 80% or more of your cash value from the start.
Step 4: Fund Your Bank
You need to capitalize your banking policy by paying your life insurance premiums and paid up additions. You are overfunding life insurance by stuffing as much money into the cash value account as possible, while still maintaining the status of a life insurance policy. There are specific limits set by the internal revenue code that limits how fast you can overfund life insurance without its status being changed from life insurance to a modified endowment contract, a/k/a a MEC.
Step 5: Buy Assets or Pay Off Debt
Once you fund your infinite banking policy, your money can then be used for other purchases or for paying off debt. You do this by taking our a loan, using your cash value as collateral.
Using your cash value as collateral allows you to maximize your dollars because your dollars are working in two places simultaneously. When you take out a loan you are still earning interest on your entire cash value account. So your money in your cash value account is growing with interest and dividends, and your money is also growing in the asset you purchased with your life insurance loan money.
Whether you are an entrepreneur investing in your business or a real estate investor, using life insurance as your bank creates a powerful financial tailwind that offers control and flexibility with your money.
Alternatively, you can also use this strategy of being your own bank to pay off debt. We have an in depth article on the subject of using life insurance to pay off debt faster, and while you are still alive.
Step 6: Recapitalize Your Bank
The next step in being your own bank is to pay back your loan. You want to recapitalize your banking system by putting your dollars back into your policy so that when the next opportunity arises you are ready to pounce.
For example, let’s say you purchased real estate. Maybe you are looking to rent the property or simply do a flip and sell the property. You can take the cash flow from your investment property and pay back your bank or you can wait until you fix and flip the property and then pay back you loan. Now you are ready to repeat the process.
Step 7: Repeat the Process
The idea behind becoming your own banker with infinite banking is to fund your policy, purchase cash flowing assets, and then use the money from your other assets to replenish your banking system and then repeat the process over and over. You now have a ready source of capital to be deployed when opportunities arise, in a tax sheltered environment, that offers additional benefits like asset protection, guaranteed growth, and liquidity.ย All with the peace of mind that if you die early your family will be taken care of due to the leveraged death benefit.
The Self Banking Blueprint
A Modern Approach To The Infinite Banking Concept
The 7 Benefits of Becoming Your Own Banker with Whole Life Insurance
In our pros and cons of infinite banking, we covered the advantage and disadvantages of using whole life insurance as your bank. We list five such benefits below.
1. Safety
Choosing to structure an infinite banking life insurance policy from among the highest rated life insurance companies provides you with a stable foundation to build from. Many of these carriers are mutual insurance companies, that have been around for over 150 years.
In 2008 we learned that many financial institutions are not as stable as life insurance companies since they often take on huge amounts of risk, often leveraged out to dangerous levels. And many banks are active in the derivatives market, which should be cause for some concern.ย During the first half of 2023, the notional amounts of outstanding interest rate derivatives saw a 17% increase, reaching $574 trillion, while foreign exchange derivatives experienced a 12% rise, amounting to $120 trillion. Source.
In contrast to the high risk associated with Wall Street, your whole life insurance is not an investment, but a savings vehicle that acts as your “Safe Bucket”. It provides you with a solid financial foundation to transact your own personal financing from, that is separate from Wall Street and big banks.
2. Uninterrupted Compound Interest
Your whole life insurance policy should be designed to create early high cash value growth. The designs of infinite banking whole life insurance policies are not focused on death benefit, but on cash value accumulation and growth via a paid up additions rider, which allows you to overfund your whole life insurance banking policy.
The benefit is that even while you have an outstanding policy loan, the entire balance of your cash value in the whole life insurance policy continues to earn interest and dividends. That means your cash value is growing with uninterrupted compound interest, even as you borrow against your cash value and purchase other cash flowing assets.
3. Privacy
Your life insurance cash value and any life insurance policy loans do not show up on your credit report. If you have a large outstanding policy loan, it will not interfere with you qualifying for other types of loans, such as a mortgage loan for an investment property.
Also, you do not have to qualify for life insurance loans. You have a contractual right to withdraw or borrow against your policy whenever you choose, for whatever you choose.
4. Creditor Protection
Another aspect of safety and privacy is whole life insurance creditor protection. Most states have asset protections in place for the cash value in life insurance, so your money is safe from judgments and creditors.
5. Traditional Bank Savings Account vs Whole Life Insurance as Your Bank
When your whole life insurance becomes your bank you gain many benefits versus using a traditional bank savings account. Check the chart below to see how a traditional bank savings account stacks up versus a whole life insurance policy designed for high cash value accumulation.
| Traditional Bank Savings Account | High Cash Value Whole Life Insurance Policy | |
|---|---|---|
| Earnings Rate | The national average yield for savings accounts is 0.58 percent APY as of Dec. 18, 2023 (*Bankrate, December 13, 2023). But actual earnings are less after tax and not guaranteed. | Guaranteed (average) 3% interest. Plus an additional 2%-4% dividends. Tax-free, so net earnings of 5%-7%, which may increase as interest rates increase. |
| Withdrawals and Earnings | Amount available for withdrawals is lower because gains in the account are taxable. | Full amount of cash value is available for withdrawals. |
| Loans | Does not offer loans. Loan would have to be obtained through a bank or other lender. | Loans are available via the cash value, with no approval needed. Plus, the amount borrowed still continues to generate interest and dividends. |
| Loan Repayment | Amount and due date of repayments is determined by the bank or lender. If payments are late or missed, it negatively impacts your credit score. | No required loan payments. Policyholder determines when and how much is paid - or even IF payments are made. |
| Added Benefits Upon Death | Paid on Death (POD) to a beneficiary. | Death benefit is paid to beneficiary income tax free. |
| Living Benefits | None | ~Chronic Illness Rider - With a chronic illness diagnosis or need for long-term care, funds may be accessed from the death benefit. ~Accelerated Death Benefit - Death benefit funds may also be accessed in the event of a terminal illness diagnosis. ~Protection from 3rd party creditors - In most states, whole life insurance is protected from creditors, lawsuits, and bankruptcy. |
| Costs | Potential savings and checking fees. | Premium is required for death benefit. However, premium payments are leveraged for a larger death benefit payout - which is received income tax free by the beneficiary(ies). |
| Creditor Protection | Minimal. | Creditor protection based on individual state laws. |
6. Tax advantaged
Some of the advantages of whole life insurance are tax deferred growth, tax free policy loans and a tax free death benefit.
The Internal Revenue Code has several section devoted to life insurance, including section 7702. A section 7702 Plan is simply referring to cash value life insurance, and the many tax benefits it receives under the Code.
Within your infinite banking system, your money accrues dividends, has guaranteed growth, enjoys tax-advantaged accumulation, and tax-free use of money. And when you die, your beneficiary receives your death benefit tax free.
7. Leverage
Use your cash value to purchase cash flow assets, such as real estate. This is a great real estate wealth building strategy, where you borrow against your cash value from the general account of the whole life insurance company for the down payment, while the remaining 75-80% of the property is financed through a mortgage loan. By doing this you are using other people’s money, (the insurance company’s and the bank’s), to fund your purchases.
Potential arbitrage is available as you use your cash value as collateral to purchase higher income producing assets. You continue to earn interest and whole life insurance dividends in your policy, but your money is also at work simultaneously in your income producing asset.
You can then take the money you get from your cash flowing asset and use it to repay your loan to the whole life insurance company, so that you can recapitalize your banking policy and repeat the process over and over.
And you don’t have to limit yourself to real estate. This process can be utilized for whatever purchases you need to make, such as buying cars, paying down debt, financing your business pursuits, buying beaten down dividend paying stocks, or whatever opportunity you find.
The idea is that you finance everything you buy, so you might as well be your own banker and charge yourself interest on your money that you are borrowing from yourself, rather than to a bank.
*You finance everything you buy. Nelson Nash
Pay Interest vs Pay Cash vs Pay Yourself
Consider that you either buy on credit, buy with a loan, or buy with cash.
Pay Interest
When you buy on credit you pay interest to the credit card company. You end up paying more for the item than the actual price since you also pay interest. Likewise, when you buy with a loan, you are borrowing the money to make the purchase and you have to pay back the loan with interest.
Pay Cash
And when you buy with cash, you don’t have to pay interest, but you forfeit your opportunity cost of what you could have used that cash for. Now you have to build up your cash balance again and you cannot take advantage of opportunities that might present themselves to you because you have no money.
Pay Yourself
The infinite banking concept taught by Nelson Nash is that by acting as your own banker you are borrowing from yourself and paying yourself back. Essentially, you are recapturing your own money that you used to purchase whatever item you just bought. The money remains in your own money ecosystem (your whole life insurance policy), rather than passing through banks.
By executing the “be your own bank” strategy, it allows for true compound interest growth, as the money remains at work in your whole life insurance policy, even when you borrow against your cash value. You then pay yourself back, recapitalizing your infinite banking policy, so that you are ready to seize the next opportunity when it presents itself.
Next Steps
We know that weโve gone over a lot of information here, some of which may seem really complicated, but the truth is, the most complicated mechanization behind all of this is simply grasping the idea that a dividend paying whole life insurance policy can be used for so much more than just a life insurance policy with a death benefit.
Once youโve grasped that concept, understand that a whole life insurance policy used to be your own bank isnโt and โinvestmentโ per say.ย Rather, itโs a change of thought which can fundamentally change the way you use and leverage your money.
Donโt worry if you donโt fully understand all the specifics right away, thatโs what weโre here for.ย We will explain how these types of life insurance banking policies work, what youโll need to do to qualify for one and help you find the best infinite banking life insurance policy for you!
So, what are you waiting for?ย Give us a call today or schedule a call with one of our Pro Client Guides and see what we can do for you.
The Self Banking Blueprint
A Modern Approach To The Infinite Banking Concept
22 comments
Jarrell
How much does it take to start being your own bank?
Insurance&Estates
Hi Jarrell,
There are various ways to go about setting up a policy. You can design the infinite banking policy so that the base premium is something you believe you can reasonably pay in good seasons and in bad, when money is flowing or when things are tight. You can then have the paid up addition portion of the policy be 3-4 times as high, so that if you choose to fund the policy with more money you can. This policy design provides a lot of flexibility.
I recommend that if youโre interested in Infinite Banking, connect with either Denise@insuranceandestates.com or Barry@insuranceandestates.com by emailing or scheduling on their respective calendar there.
To your success!
Steve Gibbs for I&E
Steven Gibbs is a licensed insurance agent, and the following agent
license numbers of Steven Gibbs are provided as required by state law:
Resident License; AZ agent #17508301,
Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
LA agent #769583, MA agent #2049963, MN agent #40563357,
UT agent #655544.
Matthew Curotto l
I have so many questions. Who can I talk to, to get answers and understanding?
Steven Gibbs
Hello Matthew, thanks for connecting. We have numerous webinars and videos on our website and 100’s of articles on our blog covering virtually every aspect of this strategy.
When you’re ready, you can also reach out to Denise Boisvert to schedule a call by emailing her at denise@insuranceandestates.com.
Best, Steve Gibbs for I&E
Steven Gibbs is a licensed insurance agent, and the following agent
license numbers of Steven Gibbs are provided as required by state law:
Resident License; AZ agent #17508301,
Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
LA agent #769583, MA agent #2049963, MN agent #40563357,
UT agent #655544.
lawrence jeffords
interested in be your own banker policy
SJG
Hello Lawrence and thanks for inquiring. A great next step is to email Denise Boisvert at denise@insuranceandestates.com to request a call.
Best, Steve Gibbs for I&E
Steven Gibbs is a licensed insurance agent, and the following agent
license numbers of Steven Gibbs are provided as required by state law:
Resident License; AZ agent #17508301,
Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
LA agent #769583, MA agent #2049963, MN agent #40563357,
UT agent #655544.
Jared
I feel like thereโs a catch.. surely I donโt just buy a policy and have access to all that money to do with as I please.. right?
SJG
Hey Jared, there isn’t really a catch except that a best practice for any cash value policy is arguably to “let it bake”. Loans are typically available early on at about 90% of cash value in most cases. However, policy loans do have interest rates to consider, notwithstanding these rates (5-7% currently) are somewhat nominal when compared to other bank rates. Point being, this is an asset with easy leverage capability. There isn’t anything mysterious about cash value life insurance (see IRS Code 7702); however, “do as I please with it” isn’t accurate either. Become a student of this asset. We get call from folks in other countries asking for it and it isn’t available there.
Best, Steve Gibbs for I&E
Steven Gibbs is a licensed insurance agent, and the following agent
license numbers of Steven Gibbs are provided as required by state law:
Resident License; AZ agent #17508301,
Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
LA agent #769583, MA agent #2049963, MN agent #40563357,
UT agent #655544.
Mariyah Rojas
Iโm 22 years old and I want to become my own bank. I feel as thought a step by step guide would be more helpful than the step by step process provide. Although There was just a update I hope 2023 update would have better detailed information. So that more motivated young people like myself, can have the online resources that we need to achieve our goals.
SJG
Hello and thanks for your comment and insight. We’ve done some education on the 7702 updates so that would be the biggest take away for 2022-2023. Also, we are always seeking to bring things current in terms of our high cash value pages and articles.
Best, Steve Gibbs for I&E
Steven Gibbs is a licensed insurance agent, and the following agent
license numbers of Steven Gibbs are provided as required by state law:
Resident License; AZ agent #17508301,
Non-resident Licenses: TX agent #2273189, CA agent #0K10610,
LA agent #769583, MA agent #2049963, MN agent #40563357,
UT agent #655544.
Osagie Agboh
I will like to explore the option of BYOB through whole like Ins.
I think it is a great idea!
SJG
Hi Osagie, thanks for connecting! It looks like one of our IBC experts connected with you.
To your success!
I&E Pro Team
Eugene
Hi
How to incorporate this into a family trust thing,or it’s just a one man thing?
Insurance&Estates
Hello, this strategy can be utilized with and compliments a family trust in a number of ways. For starters, the life insurance death benefit could be directed to the trust for dynasty planning purposes and death benefit proceeds are far more flexible and offer tax advantages vs. other kinds of accounts. A great next step would be to schedule a discussion by connecting with Barry Brooksby at barry@insuranceandestates.com.
Best, Steve Gibbs for I&E
Lawrence
Hi, I want to get my daughter started with this. She is 19 years old and my other son is 14, will they be to qualify? thanks
Insurance&Estates
Hello Lawrence, a great first step is to request a call from Barry Brooksby by emailing him at barry@insuranceandestates.com.
Best, Steve
Nik Catalina
How does this work for people at or above a certain age? Are there companies that will issue whole life policies to aged individuals … or is there a cut-off age ? I imagine the premiums would be high ? Please adivise Thanks
Insurance&Estates
Hello Nik, this can work at older ages depending upon health and other factors. Your best first step is to connect with Barry Brooksby by emailing him to request a call at barry@insuranceandestates.com.
Best, Steve
carla domino
Do you have your lecture on video ,I’m hearing impaired and will need close capture.
Insurance&Estates
Hello Carla and thank you for inquiring. At this point I do not have a close caption version of the lecture and apologize for this. I will work on getting this one updated for you. In the meantime, if you haven’t already I invite you to check out our blog page and search “be your own bank” at the top of the page to get an article on this topic also.
Best, Steve Gibbs for I&E
Vincent F Malfa
Do you have software for being own banker
Insurance&Estates
Hello Vincent, thanks for reading and commenting. Yes we like Truth Concepts software for IBC design and financial comparisons, etc. You can google search them directly.
Best,
Steve Gibbs for I&E