How Does Infinite Banking Work?

Infinite Banking is a simple process of hyper funding a cash value whole life insurance. Just like Dave Ramsey says to save and then spend so you don’t have any debt, using an Infinite Banking policy is a way to save, protect your family with life insurance and be able to keep the returns from a high interest savings account.

Infinite Banking works best when your policies are fully funded and capitalized. I urge my clients to fully capitalize all their policies by building policies with maximum living benefits like waiver of premium, paid-up additions and increased death benefit with a term insurance rider.

An Infinite Banking policy has minimum death benefit and maximum cash value from day 1 of the policy’s inception. Most companies allow for a 1:3 ratio of base premium to paid-up additions. This simply means for every $1 of death benefit there will be $3 of cash value. Here is one our policies with this exact 1:3 ratio.

In-force illustration

This is a simple starter policy for anyone who wants to see how it works. The policy has a stream of premiums of $300 per month with $100 going to death benefit and $200 going into cash value. We did not add additional funds at the inception of this policy. We wanted to utilize the simple compounding savings component and protect Claudia’s future income.

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