What is Privatized (Infinite) Banking and How Does It Work?

The Top 10 Advantages of the Infinite (Privatized) Banking (Pri-Ban”) Concept

Infinite (privatized) banking is a concept created by Nelson Nash that focuses on how you can become your own banker using dividend-paying whole life insurance or indexed universal life insurance.

Becoming your own banker means you use your participating whole life, or indexed universal life insurance policy as your personal bank, drawing money from it through withdrawals, or preferably, life insurance loans, and using the money you borrow from your life insurance to purchase income-producing assets.

An example of infinite (privatized) banking would be as follows:

1. Fund a properly designed participating whole life insurance policy, focused on cash value accumulation versus death benefit. For those who are willing to wait a year before needing to access their cash value and who is more of a risk-taker, Indexed Universal Life (IUL) can be used as an Infinite (Privatized) Banking vehicle.  Historically speaking, the IUL, over time, will provide a higher cash value and higher death benefit than a similarly funded participating Whole Life policy. Both types are protected from loss. The IUL can dramatically fluctuate from year to year, while the participating whole life is far more predictable on a year-to-year bases.

2. Consider your whole life (or IUL) insurance policy as your own bank. The first step once your policy is in place is to capitalize your bank, so you have money from which to practice infinite banking.

3. Once your policy is capitalized, typically within one to three years for an IUL and 48 hours for a Participating Whole Life policy, you can then begin to look for investment opportunities or large ticket purchases, such as vehicles. Investments can be anything where you get cash flow, but typically include real estate, vehicles (trucks), dividend-paying stocks, oil wells, cacao farms, etc.

4. Once you locate an investment opportunity, you then borrow from your life insurance using your cash value as collateral. The life insurance company sends you a check or deposits money in your bank account, and you use the money to purchase the investment or big-ticket item.

5. Once you have purchased the investment or big-ticket item, you begin to pay yourself, using the cash flow from the investment to pay down your life insurance loan. Alternatively, if your purchase was a large ticket item, such as a vehicle, you create a payback schedule, charging yourself interest, to “refill” your bank, i.e. your life policy.

6. Once you have paid back your loan, and/or when another investment opportunity arises, you borrow against your “Pri-Ban” policy’s cash value to purchase more investment opportunities or to pay down your own financial obligations.

7. While you are practicing infinite banking, you are also building up your cash value, which in turn is increasing your life insurance policy’s death benefit. Over time, your death benefit will increase, so that as you age, your total death benefit payout to your beneficiaries will grow and grow, creating a financial legacy.

8. What is sometimes difficult to understand is that you will continue to earn interest on the entire cash value (regardless of all outstanding loans). In most cases, the interest earned is greater than the interest paid on outstanding loans.  As an example, let’s say you have a cash value equal to $100,000.  You borrow $50,000 from your cash value. (In actuality this is called “Non-Direct Loan Recognition”; which means that you are actually borrowing from the insurance company that uses your cash value as collateral.  This leaves the full cash value available to earn interest.) As an example, you pay 5% on the loan (the insurance companies I use cap these loans at 5%).  Meanwhile, you are earning 7% on your cash value.  You are paying 5% on $50,000 while earning 7% on $100,000.  You do the math.

9. Can you see the possibilities?? You are earning interest on the entire cash value while using the borrowed money to generate a return on investment.  You are now doing what banks are doing, using the same money to generate multiple revenue flows.

10. Self-Completing Plans (death benefit, terminal illness, chronic illness, and critical illness protection.) 

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