May 21, 2025
The Infinite Banking Concept (IBC) has gained substantial traction in recent years as a powerful wealth-building strategy. Rooted in the use of dividend-paying whole life insurance policies, this method allows individuals and business owners to become their own bankers. With high-interest loan rates from traditional banks and the rising demand for liquidity and control, more Americans are turning to carriers like Ameritas to capitalize on guaranteed loan access at a fixed 4% rate. In this in-depth guide, we explore how IBC works, the numbers behind it, and why it might be your smartest financial move this year.
What Is the Infinite Banking Concept (IBC)?
The Infinite Banking Concept is a strategy developed by Nelson Nash that utilizes whole life insurance policies with high cash value components. These policies grow cash value on a tax-deferred basis and allow policyholders to borrow against the value for any reason—business expenses, real estate investments, education, or even personal needs.
With IBC, you're essentially creating your own private banking system.
Key Features:
Use of whole life insurance, not term or universal life
Access to cash value through policy loans
Tax-deferred growth of cash value
Dividends that can enhance growth (depending on carrier performance)
Why You Should Borrow Against Your Cash Value for Tax Purposes
One of the most underutilized strategies in financial planning is leveraging the cash value in a whole life insurance policy for tax-advantaged loans. Here's why it works:
Loans from a whole life policy are not considered taxable income. You’re borrowing against your own asset, which means you can access funds without triggering a taxable event.
Avoid capital gains taxes. Unlike withdrawing from an investment account, which can result in capital gains taxes, borrowing against your policy keeps your tax liability at zero.
Preserve your Social Security and Medicare thresholds. Because the loan does not count as income, it won’t increase your adjusted gross income, which is important for retirees concerned with tax brackets and benefits.
Strategic tax-free liquidity. Need cash for a down payment, medical bill, or business investment? Policy loans provide fast access to capital without the tax implications that come with traditional loans or asset liquidations.
In short, borrowing from your policy allows you to unlock cash without diminishing your long-term tax strategy—a key advantage for both high-income individuals and business owners.
Comparing Loan Interest Rates: Banks vs. Whole Life Policy Loans
Source | Average Loan Interest Rate (2024) | Terms & Restrictions |
|---|---|---|
Traditional Bank | 7.50% - 11.00% (prime + margins) | Strict underwriting, credit check |
Credit Cards | 19.00% - 29.99% | Revolving, high-interest |
SBA Loans | 10.25% - 13.50% | Long approval timelines |
Ameritas Life Insurance | 4.00% Fixed | No credit check, fast access |
Statistical Insight: According to the Federal Reserve’s April 2024 Consumer Credit Report, the average personal loan rate in the U.S. is 11.48%, while credit card rates have exceeded 21.59%. In contrast, Ameritas policyholders can borrow from their whole life policy at a flat 4%, often with same-day or next-day access.
The spread between these figures represents a massive opportunity for wealth-conscious consumers and business owners.
Savings Accounts vs. Dividend Payments
Account Type | Average Annual Yield (2024) | Liquidity | Taxation |
|---|---|---|---|
High-Yield Savings | 4.50% | High | Taxable Interest |
Traditional Savings | 0.40% - 1.00% | High | Taxable Interest |
Ameritas Dividends | 5.00% - 6.20% (historical avg) | High | Tax-Deferred |
While high-yield savings accounts are offering better returns than they have in over a decade, they are still fully taxable and subject to change based on Federal Reserve policy. Ameritas whole life policies, by contrast, pay out non-guaranteed dividends that historically range from 5% to 6.2%, which can be reinvested, used to repay loans, or taken as cash. Additionally, these dividends benefit from tax-deferred treatment within the policy structure.
Insurance Loan Model vs Bank Loan Model
Loan Type | Bank Loan | Insurance Loan |
|---|---|---|
Value | $100,000 | $100,000 |
Interest Rate | 7% | 4% |
Interest Accrued (5 Year Period) | -$25,000 | -$10,000 |
Dividends Earned (5 Year Non-Guaranteed) | $0 | $28,000 |
Total Amount Due After 5 Years | $125,000 | $0-$82,000 |
Loans taken against whole life insurance policies are flexible and optionally repayable. Policyholders can maintain their coverage by repaying the loan using future dividends or premium payments. Alternatively, if the loan is not repaid, the outstanding balance will be deducted from the policy’s cash value or death benefit—or the policy can be surrendered altogether. This flexibility makes whole life insurance a powerful tool for liquidity and long-term financial planning.
Living Benefits of Whole Life Insurance
Many people view life insurance only as a death benefit. However, whole life insurance offers powerful living benefits that can be used while you're still alive:
Access to cash value at any time for any reason
Policy loans that don’t affect your credit score
Potential for dividends to fund major purchases, retirement, or emergencies
Chronic and critical illness riders on many policies
These benefits provide unmatched financial flexibility and security during your lifetime. With Ameritas policies, Terminal Illness warrants 75% of the death benefit to the insured as a guaranteed lump sum for qualifying conditions. Followed by 50% for chronic illness and 25% for critical illness. This is a free rider that comes standard on these policies.
Meet Kelly & the Impact of Living Benefits (Hypothetical Example)
Kelly bought this insurance coverage and five years after purchasing the policy was diagnosed with Stage 3 breast cancer and was off work for several months. Kelly exercised the Critical Illness benefit to help pay medical bills, the mortgage and other daily living expenses. Without the money from this benefit, Kelly would not have had enough to cover many of these expenses.
Purchase Profile Female, age 35, Preferred Non-Tobacco
Initial Specified Amount (Death Benefit): $1,000,000
Critical Illness Amount Available (25%) $250,000
Total Premiums Paid (monthly) $60,000
Death Benefit Amount Remaining in 5 years: $750,000
Real-World Use Cases: IBC in Action
Individuals: Sarah, a 35-year-old professional, builds her policy over 5 years and borrows $30,000 at 4% to fund a real estate down payment. Instead of losing opportunity cost to a bank, she repays herself and recycles her capital.
Business Owners: John, a 48-year-old contractor, uses a $100,000 policy loan to buy new equipment for his business. No credit check, no delay, and the interest he pays goes back into the policy’s cash value—a true internal financing solution.
Tax Advantages and Liquidity Control
Loans against whole life policies are not considered taxable income
The cash value grows tax-deferred
Upon death, the death benefit pays out tax-free to beneficiaries
These elements make IBC uniquely suited for legacy planning, business continuity, and personal liquidity.
Who Should Consider IBC?
Individuals who want to bypass banks
Entrepreneurs needing flexible capital
Families planning for legacy and retirement
High-income earners seeking tax-deferred growth
Infinite Banking isn’t a gimmick. It’s a disciplined, proven strategy for long-term financial control. When done right with a reputable carrier, it can unlock powerful growth and freedom for individuals and business owners alike.
Stop letting banks control your capital. Start banking on yourself.
