Infinite Banking Concept equals decentralization, and equals freedom from the global banking system.*
The 50-year-old Infinite Banking Concept, created by R. Nelson Nash, which predates the development of both the Internet and the Blockchain, provides clear, simple, step-by-step instructions to free you from dependence on the modern banking system. This is true banking decentralization, both literally and figuratively. It provides credit just like today’s decentralized banks like the MakerDao or DJED/JUST. It is equally ironic, that the main tool of freedom; whole life insurance, has existed for over 150 years in this country. It’s existence and it’s rediscovery bring to mind a quote attributed to the famous scientist Albert Einstein;
There are a few new ideas , but there are many old ones we have forgotten.<
I will explain how this legacy product works using an illustration.
Whole Life Insurance, as a financial tool was well know and used by multiple generations of farmers in America for over 100 years. The name “Whole life insurance” is the name a life insurance policy that a farmer took out when he was very young and he used it for his “entire or whole life”, thus it earned the name “whole life”.
A “Whole Life” life insurance policy contains as an integral or core component, a savings account called the “Cash Value” of the policy, upon which the insurance company pays the Policy owner a guaranteed rate of compound interest. The guaranteed interest paid is “compound interest” and it accumulates within the savings account portion of the “Whole Life” insurance policy and it is called the “Cash Value” portion of the policy. The farmer or policy owner is allowed to apply and receive “loans” against the cash value, for which he pays a “pre-agreed upon” and “fixed rate” of “simple interest” for the life of the policy. Which by design is in effect for his whole life, by design.
Important Concept:
The value of this “cash value” portion is determined by the premiums paid to the insurance company. R. Nelson Nash, the founder of the Infinite Banking Concept, learned that those premiums can be subdivided into portions which pay the death benefit and portions contributing to the cash value. And the portion of the monthly premium which goes to each can be negotiated at the start, to effectively grow the cash value faster, so as to create a rapidly growing pool of money, which could be used to finance purchases, essentially creating a small personal bank to use for the life of the policy, which was designed to last his entire life.
Now back to the illustration;
Because the loan was secured by the cash value the farmer didn’t need to submit to a credit check or provide tax returns or paystubs. He simply requested a loan in writing and he could receive the money in 1-2 days. Sooner if he went to insurance office in person, that way same day service was possible. The farmer used the cash value portion of his whole life policy as a financial instrument to finance his needs for purchases not unlike the way the modern individual uses financing from a bank to finance his purchases of things he needs every day.
The farmer used this financing tool called cash value to finance the purchase of seeds and other essential equipment on a yearly basis while running his business, which was his farm. And this financial toll was an essential part of his financial ecosystem. The whole life insurance policy allowed him to function to various degrees as an individual financier, independently of the banking system because he provided his own financing for his daily needs. Then when the farmer died he left to his wife and children the knowledge of this financial system which allowed him to function as an individual independently of the banking system because he provided his own financing for his needs and he left to them a death benefit which allow them to purchase the farm and pay off his debts when he died. Thus he created a personal debt facility with the loans collateralized by the cash value portion of the policy, which was essentially a personal bank. It is an independent financial system which basically financed his life and business and at the end of his life he made sure that his children were better off then he was financially by eliminating their main debt “the mortgage on the farm”, which was paid off by the death benefit of his whole life insurance policy. These ideas and concepts were well known in America, but appear to have been lost in our transition from a largely farm based economy to a largely industrial one. Ironically, the only part of this knowledge, which remained widely distributed in our culture was the association of dying with the phrase “bought the farm”. But it is totally stripped of its financial ramification and financial achievement. The current understanding of the phrase is simply that someone died.
Summary
If you understand decentralized credit debt facilities, you now understand that the original “infinite banking concept” is essentially a personal decentralized finance system which allows you to create your own credit debt facility for your personal needs. The infinite banking system, as originally created by R. Nelson Nash 50 years ago, uses a financial vehicle called Whole Life Insurance to help you create a personal credit facility, which grows during your lifetime from a small fund, for small loans into a large fund for major financing events like a car purchase, college education, financing a home mortgage or even financing a business startup. The R. Nelson Nash version of Infinite Banking teaches insurance agents how to sell Whole Life Insurance products, which are specifically tailored to provide maximal cash value accumulation to create this cash fund, which is controlled by the policy owner. This is ironically decentralized financing using a heavily modified or “purpose built” “Legacy financial system product” called whole life insurance, not a cryptocurrency blockchain based credit facility.
Focus on the cash value portion of a whole life policy.
I would like to focus on an integral if not central component of using Whole Life Insurance as the ultimate decentralized finance vehicle to free you from dependence on the global banking system and freeing you from financial bondage to consumer debt. I love FAQs or frequently asked questions, so please allow me to use this format.
What is cash value?
In addition to a portion of your premium being used to pay for the death benefit, a portion goes into a savings account, inside your policy, which accumulates tax free at a compound interest rate determined when you buy your policy, but currently the national average for Mutual life insurance companies is around 4%, with the range being 4-6%.
Do I pay taxes on this savings account?
No, the United States Taxation Department, the IRS specifically excludes this savings account and the compound interest earned, from taxes in its tax code.
May I borrow this money while keeping the policy active?
No. But You can borrow against it. While the amount of your cash value in the policy determines how much you can borrow from the insurance company, you are not actually borrowing your money with policy loans. You are borrowing money from the insurance company general funds.
Why would I want to borrow against my life insurance cash value?
It’s a cheap source of money for investments, purchases, school, unexpected expenses or it can be part of an overall financial plan.
Do I pay interest on the money I borrow?
Yes.
Do I pay a higher interest rate on the money I borrow, then the insurance company pays on my cash value?
Yes.
How can that be a good deal for me?
Two ways:
First interest rate; The rate the insurance company charges you, on a policy loan, should be less then what your bank charges you for the same loan, or you should take the loan from your bank. Most bank consumer loans are 12% to 30% and compound interest. So a policy loan of 6-8% is a better deal based on the interest rate alone.
Second; the policy loan from the insurance company is simple interest and the majority of consumer loans are compound interest. So the interest is compounded daily, so you pay more interest.
Can policy loans can be used to pay down my consumer loan debt?
Yes.
How does this work?
Let’s look at an example: If you have a $2400 credit card balance, which carries a 12% interest rate, which is compound interest. And suppose you can only afford to pay the minimum payment each month of $100.00, of which $50 was interest, so it takes you 48 months to pay it off, for a total of $4800.00 dollars. You can borrow for example $2400.00 from a policy loan at 6% simple interest to payoff a $2400 credit card balance, and now you pay that $100 dollar payment to yourself. You still pay interest, but one half the rate and simple interest, not compound interest, so more of your payment goes to principle, not interest and the debt is retired sooner.
It seems like I am just replacing one debt with another. How does this help me?
You are correct, you are replacing one debt with another. But because you are replacing a 12% interest debt with a 6% interest debt, cutting your interest in half, you are reducing each months interest payment, while simultaneously increasing each months principle payment. This allows you to payoff the debt faster. !Additionally because you are paying less interest monthly on your consumer debt, you are spending less of your monthly paycheck on interest, so in a sense this strategy gets you that money you would have spent back into your wallet. You are paying yourself the difference. If you adjust your thinking to understand money saved on interest payments is the same as money earned because you have more cash to invest or spend, you are beginning to understand how this system gets you financial freedom.
The next important economic concept is opportunity cost.
Opportunity Cost
When I studied finance in college a very important principle I was taught was opportunity cost; which stated simply means if you use your money to buy something, you cannot use that money to buy something else, it has been spent. This means for example, if you save money in an interest bearing savings account, your savings grows inside the account year after year. If you pull that savings out of the account to buy a car, it no longer grows in your savings account. Instead you used it to buy a car. There is an opportunity cost in buying the car. The opportunity cost is that your money is no longer earning interest and growing in the bank. The opportunity to earn interest was lost when you bought the car. That is called the opportunity cost of buying the car.
A simpler illustration of this principle is ordering food in a restaurant. If your parent takes you to a restaurant, where they serve both fish and steak, but you can only order one, either fish or steak, if you choose fish, you lost the opportunity to order steak. If you order steak, you lost the opportunity to order fish. Thus the opportunity cost of ordering steak is that you don’t get to order fish. The great thing about whole life insurance is that it is an investment with no opportunity cost. It allows you to save and buy at the same time. You see with whole life insurance you can save your money inside the cash value of your life insurance policy and borrow against it for a loan, which you could use to buy things or invest in something. You can use your money for two things! Simply put, it allows you to order both steak and fish.
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Four things to look for when picking a Whole Life Insurance Company
My research into using using whole life insurance both as insurance, savings and an asset, has shown me four things to look for when selecting a company to buy your policy with a focus on growing your cash value;
- Mutual Insurance Company, because they pay dividends.
- Pick a company the practices direct or non-direct recognition of loans, and how it affects payment of dividend.
- Loan fees. Know what the insurance company loan fees are and are they fixed or adjustable rates during the life of the loan. Learn this before working with a company.
- Company rating A or better by A.M. Best.
Further Explanation of these four areas.
- Mutual insurance companies are owned by the policy holders. A mutual insurance company, considers the policy holders to be the company owners. Therefore the company profits at year end go to the policy holders, as a “dividend”, but the US Tax code refers to it as government “return of premium”, as if part of your after tax dollars were used and returned to you. So it’s not considered earned or unearned income, so it’s not taxed. This dividend can be applied to your premium or to the cash value of your policy. The majority of these companies pay this dividend every year. Ten ten of them have paid dividends every year for 100 years. That means during every financial crisis of the last century these mutual companies have paid a dividend.
- Recognition of loans. Mutual insurance companies are either direct recognition or non recognition with regards to the effect of the loans on your dividend. The companies which recognize loans may reduce your dividend if you have policy loans. Those companies considered no recognition don’t reduce your dividend if you take out a policy loan. In general, non- recognition companies, which don’t reduce your dividend if you have a policy loan are desirable. But loan interest rate is more important, so this isn’t a deal breaker because the difference in the dividend is small. if the company offers lowest loan interest rates.
- The mutual insurance companies have differing interest rates they charge for policy loans. It is of course desirable to chose mutual insurance companies with the lowest interest rates. The second, very important part of this is fixed or variable loan interest rate. If the interest rate is fixed you know you expense and your profit using interest rate arbitrage. (Arbitrage means you borrow money at 5% and use it to earn at a higher interest rate.). If the interest rate is variable, if the federal bank increases its rate, you loan interest rate increases and your profitable investment could become a losing or unprofitable investment.
- Company rating. >A.M. Best is an insurance rating agency focused on the worldwide insurance industry. Founded in New York City in 1899 by Alfred M. Best, the privately held company is headquartered in Oldwick, New Jersey. Both the U.S. Securities and Exchange Commission and the National Association of Insurance Commissioners have designated the company a nationally recognized statistical rating organization. Best issues both financial strength and issuer credit ratings. The former indicates the company's assessment of an insurer's ability to meet its obligations to policyholders. It takes into account both qualitative and quantitative assessments of the balance sheet, operating performance and business profile. Best has six secure ratings, ranging from the highest A++ to B+, and 10 vulnerable ratings, ranging from B to S, with the lowest indicating a rating was suspended. A.M. Best is the only ratings agency that specializes solely in the insurance industry. Best's short-term credit ratings reflect the company's ability to pay commitments due in less than a year, and they range from a high of AMB1+ to a low of D (in default). Long-term credit ratings reflect the company's ability to pay its commitments maturing in more than a year, and range from AAA (exceptional) to D (in default). Source
Note: I am not an insurance agent and you will pay an insurance agent to help you buy your policy. This information should help you pick a company based on your longterm goals. Now let’s move on to the next step, building your own credit facility, otherwise none as becoming your own bank.
The 5 Steps to Becoming Your Own Banker with Whole Life Insurance.
The concept of becoming your own banker is based on the idea that your savings and/or retirement could be better used inside a whole life insurance policy. This strategy has multiple advantages that I pointed out in [my book review]( Book Review: What would the Rockefeller’s Do?) called What would the Rockefeller’s Do?” A book that explains how the Rockefeller’s used this concept to preserve their family fortune, while most rich families lose most of the wealth accumulated by the person who becomes a multi-millionaire within three generations.
This is the nuts and bolts or just the facts guide to get started once you have educated yourself on this Strategy.
Step 1 – Buy Whole Life Insurance
You must take out a whole life insurance policy on yourself or, you can take out and control a policy on someone close to you to be your own bank with. This is called STOLI (stranger-owned-life-insurance).
This usually only works in these circumstances:
• Child
• Spouse
• Grandchild
• Business partner
• Key employee
You should buy your policy from a Mutual Life Insurance Company (as opposed to a stock insurance company). This is critical since mutual companies are owned by policyholders and share their profits with Whole Life policyholders in the form of dividends.
Step 2 – Add riders to increase cash surrender values to useful levels quickly.
You need these to make that sure your Whole Life policy includes there two key riders:
1 Paid-Up Additions (PUA) Rider: this is a vital ingredient to increasing the amount of cash value in the first year.
2 Term Insurance Rider: You need the term rider to bring down the cost of the total death benefit needed to support the amount of cash value you want to build up with in the policy. It also increases the amount of Paid-Up Additions you can buy in the early years, which can also help your cash value grow faster.
Step 3 – Pay more into the policy then the premiums due.
You pay additional premium above the amount required for the basic coverage to increase the cash value because 90-95% of this “over funding” goes to cash value.
You should pay up to the limit the IRS allows and still allow tax free compounding.
Step 4 – Borrow money from your insurance company to payoff higher interest debts Your cash value never actually leaves your policy even when you take a loan and “borrow against” it. This means:
A. Your cash value is always earning compound interest.
B. You repay the loan, usually at 5% simple interest or less.

You can access your cash value inside your policy one of these ways:
1 Withdraw your cash value or…
2 Borrow against your cash value using the guaranteed policy loan feature for maximum flexibility
3 Pledge the policy as collateral to an outside lender, use if their rate is less then insurance company.
Remember you are not borrowing the cash value, your entire cash value base continues growing within your policy, including the amount you borrowed.
Your cash value never actually leaves your policy even when you take a loan and “borrow against” it. You see, the insurance company is happy to give you a loan out of their general fund because they’re always holding your cash value as collateral.
Step 5 – You pay back the loan at terms favorable to you.
Here are some of your options for repayment:
• Pay principal and interest on a schedule you make.
• Make interest-only payments
• Pay nothing until you can pay the entire balance at once.
• Pay nothing and have the death benefit pay off the loan at death.
Remember these key points.
1 Your cash value usually earns a better interest rate then a savings account or certificate of deposit.
2 The growth as well as any lifetime distributions aren’t taxed as long as some small amount of whole life insurance death benefit stays in force until the insured passes away.
3 When you borrow rather than make a withdrawal, your full cash value continues growing inside the policy despite any loans you have against the policy with the insurance company.
Conclusion and last simple instructions for starting the plan without becoming a whole life insurance expert.
Read this post.
Go to the website www.infinitybanking.com
Enlist the services of a licensed insurance agent, who has completed the necessary training to understand how to build a modified whole life insurance for you, which will help you reach your dreams of financial independence. The agents are trained to prepare this product. They are part of the Nash Foundation and their job is to help you create your policy which will serve as your personal credit facility or bank.
You can check this out and figure out if it is a good fit for you.