Home Finance Things to Know before setting up an infinite banking system

Things to Know before setting up an infinite banking system

One of the reasons a person should set up infinite banking is that even when they are borrowing their money, the cash value of their policy will continue to increase till its lifetime.

At any point in time, the person can contribute additional money to increase the policy value. They can also lend their cash value to anyone when required. Moreover, the interest rates are commonly less compared to the traditional loan rates of the bank.

If the Infinite banking concept appeals to a person, there are some steps that they need to take to set up their own banking system using their permanent life policy.

  1. Start young when the premiums are still low

Just like every life insurance-related product, a person will find the premiums low when they are young. As soon as the person has a permanent life policy, their premium gets locked. Hence, the earlier they become part of the policy, the better.

  1. Choose a reputable insurer

Infinite banking should be accessed for lifelong time. If you choose a new life insurance company, they might stop operating in the long run. Hence, you should be confident that the insurance company is well-known and will remain for a lifetime.

  1. Opt for a non-direct recognition policy

You can get dividends from a whole life insurance policy based on the investment. However, when you are borrowing money out of the invested amount, you are eligible to get dividends for only the amount that is still in the account. Choosing a non-direct recognition policy is the only thing that you can do to get dividends on the full cash value irrespective of the borrowed money.

  1. Select a policy that can benefit your beneficiaries

After the death of the policyholder, the company will absorb the cash value and provide the policy’s death benefit to the beneficiaries. You can avoid losing the cash value by making the beneficiary a cash value rider on the policy. The cash value that you have built over the years will be in the beneficiary’s name as he/she also has got the face value.


We hope now you understand the best tips to keep in mind while setting up the infinite banking process as a policyholder in a recognized life insurance company.