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The Infinite banking system is a wealth strategy that utilizes dividend-paying whole-life insurance as an alternative to saving and borrowing with a traditional bank. While there are several benefits to using a whole life insurance policy as your private bank, perhaps the two biggest draws are its tax advantages and guaranteed growth compared to a bank savings account, CD, or share certificate. Namely, you can often expect a greater rate of return—plus potential dividends—and you can access this growth without owing taxes.

If it sounds too good to be true, it could be. Most whole life insurance policies aren’t structured to support an infinite banking system, meaning they grow wealth incredibly slowly. The slower your policy accumulates wealth, the less advantageous it is and the longer it takes before you can use your policy to fund purchases, investments, or your retirement. However, with a properly structured policy, reducing reliance on traditional banks and protecting your wealth from market volatility can happen sooner than you think.

So what’s the secret to a successful infinite banking system?
In this article, we’ll explain the difference between your average whole-life insurance policy and a properly structured whole-life insurance for Infinite Banking.


Permanent life insurance, whole life included, features a unique asset that term life insurance doesn’t offer. When you buy permanent life insurance, a portion of your annual premium is reflected in a built-in savings account called cash value. You can withdraw your cash value during your lifetime, or you can borrow it from your insurance company tax-free. 

In addition to your premium payment, your cash value also earns a rate of return. Depending on the type of permanent insurance you buy, this rate of return may be calculated based on sub-accounts or market indexes (like with universal life insurance), or it can be a guaranteed rate set by your insurance company (like with whole life insurance).Whole life insurance is preferred for an infinite banking system because a guaranteed rate of return helps protect your cash flow from market volatility and promises steady growth. An additional dividend is also provided by the mutual companies on top of the guarantees, which have been historically proven, even in a low-interest rate environment.

Step 1: Creating the INFINITE BANKING Structure

Infinite Banking with Whole Life Insurance is two steps further than a typical whole life insurance policy. 

First, Infinite Banking utilizes participating whole-life policies from mutually funded insurance companies. Mutual insurance companies work in the best interest of the policyholders. When the company is profitable, it extends these profits to policyholders through dividends. So when you use a participating whole life insurance policy from a mutually funded insurance company you earn a guaranteed rate of return and have the potential to earn dividends—further growing wealth and supporting a robust infinite banking system. The mutual insurance companies we work with at Think Outside The Stocks have historically paid dividends for over 100s of years. 

Second, Infinite Banking Accounts are designed with paid-up additions (PUA) riders that create instant liquidity. A paid-up additions rider allows the policyholder to “overfund” their policy in its early years to maximize growth and supercharge the policy’s earnings over the life of the account. The design of the policy, specifically how much PUA can be added, adheres to the Internal Revenue Code Section 7702, which defines the maximum contribution level of a life insurance policy without the growth being taxed. (An Infinite Banking Account is also known as a 7702 Account or a 770 Account.)  

Since 1983, all life insurance policies have had a requirement called the 7-pay test. The 7-pay test measures the amount of money paid into a policy over the course of seven years, relative to the amount of insurance coverage or death benefit. If a policy passes the 7-pay test, the cash value grows tax-deferred and can be accessed tax-free. If it doesn’t pass the 7-pay text, it is classified as a modified endowment contract (MEC) and can have tax consequences.  Creating and maintaining the proper structure is thus very important. Wealth Maximization Accounts toed the line just below MEC classification, far outperforming traditional whole life insurance in terms of growth while still receiving the same tax advantages.


Although participating in whole life insurance is the preferred vehicle of a successful infinite banking system, it’s essential to understand your primary goal isn’t the policy’s death benefit. Yes, you’re buying insurance, but the idea is to purchase the smallest death benefit possible while contributing the maximum-allowed amount by the IRS and retaining tax advantages. You’re using insurance as your bank first and as an insurance policy second. 

Whole life insurance is substantially more expensive than term life insurance of the same face value. Still, with whole life insurance, only a portion of your premium goes toward paying for the death benefit. The rest is in your “bank” as cash value, earning interest and dividends. Plus, where term insurance is a “use it or lose it” financial tool, participating whole life insurance provides lifetime guarantees.

Step 3: Use for Any Purpose, at Any Age while you are alive 

A as your financial foundation. Instead of cash sitting in a bank, it will be in an account that earns a greater rate of return. Unlike a qualified retirement plan, it retains liquidity and you won’t be penalized for accessing your cash value, regardless of your age or how much wealth you’ve accumulated. If you need to borrow against your insurance policy to take advantage of a purchase or investment opportunity, it comes with a guaranteed loan provision, of which you determine the pay-back schedule. And when you pass away, there is a death benefit payout. 

AAccount by itself won’t make you wealthy. But when you factor in the benefits, including tax benefits, low costs, liquidity, rate of return, protection from market volatility, protection from creditors, and no limit to yearly contribution amounts (like with a 401k), it’s easy to see why executives, banks, corporations, and wealthy individuals rely on the nfinite anking system to help grow and protect their wealth.

Step 4: Preserve and Protect your Wealth 

  • Automatic asset protection in most states 

Most states offer automatic asset protection for whole-life insurance policies. This means that the cash value and death benefit of your policy are shielded from creditors, lawsuits, and other legal claims. This provides a powerful layer of protection for your hard-earned wealth, ensuring that it remains safe and secure even in the face of unforeseen circumstances.

  • No access to creditors 

Whole-life insurance policies are also protected from creditors. Unlike other financial instruments, the cash value and death benefit of your policy cannot be seized or accessed by creditors. This further safeguards your wealth, preventing it from being eroded or diminished by legal claims or financial obligations.

Step 5: Pass the Tax-Free* Generational Wealth 

  • Tax-Free Income

The cash value of your whole-life insurance policy can be withdrawn tax-free. This means that you can access the growth and earnings within your policy without incurring any income tax liability. This can be a powerful tool for funding purchases, investments, or your retirement without the burden of taxation.

  • Federal Estate Tax Exemption
The death benefit payout from your whole-life insurance policy is subject to the federal estate tax exemption limits. This means that a portion of the death benefit can be passed on to your beneficiaries without being subject to estate taxes. This can help preserve a significant portion of your wealth for future generations.By leveraging these powerful features, the Infinite Banking System allows you to not only grow your wealth but also protect it from external threats and pass it on to your loved ones in a tax-efficient manner. This can be a crucial component of a comprehensive wealth-building and preservation strategy.

Bonus Step: Use Infinite Banking as an AND asset

Be on a look out for our next blog where we will talk about how Infinite Bank is an AND asset and how you can use it for different purposes  


We not only understand how an Infinite banking Account works, but have first-hand experience using whole life insurance as a financial foundation. They’ve worked with thousands of clients to set up participating whole life policies properly structured to help them reach their financial goals.

Now it’s your turn.

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