If you have not yet read Nelson Nash’s book, Becoming Your Own Banker, 5th Edition, read it before you go any further. The book is full of information that most people who just ‘skim the book’ completely miss.

If you have already read Nelson’s book, re-read it at least once more. It is not a book that you can read once and fully understand. Each reading will result in a deeper understanding as the power of the Infinite Banking Concept (IBC) unfolds before you. Pay particular attention to Part IV, Equipment Financing and make sure you understand what is happening on page 80, “Earnings went to the Owner’s Policy, Not to the Insurance Company”. If you don’t understand and can’t explain this page, you don’t understand the concept. Re-read the book and talk to a qualified ‘banking coach’ until you do.

There is no better way to really cement your understanding of IBC than to work with a financial coach/advisor that thoroughly understands the concept and can expertly convey that understanding to you. Trying to talk with a ‘financial advisor’ or an ‘insurance agent’ about Infinite Banking would be like talking to your stock broker about Real Estate, or your surgeon about Homeopathy. They are neither trained nor qualified to accurately respond to what IBC is all about or how it works, and especially what it can do for you.

An insurance policy is exactly that, an insurance policy. It is NOT a bank. Banking is a process, not a product. All banking transactions require accounts to hold money that is currently NOT being used for banking purposes. Because those accounts are a part of the Infinite Banking process, proponents of IBC will sometimes refer to their insurance policies as ‘their bank system’. Technically, the policy is NOT a bank but is a part of the Infinite Banking Process which takes advantage of the living benefits of a properly structured, dividend-paying whole life insurance contract with a reputable 100+ year old insurance company to hold capital assets. Don’t be surprised when you start talking about the “living benefits of life insurance”, because life insurance has been sold almost exclusively for the death benefit alone. Capitalizing on the living benefits of life insurance separates IBCers from those looking for cheap death benefits. Properly structured as a part of the banking equation, the insurance account can become a major platform from which to conduct all of your banking and financing activities, thereby recapturing and recycling tens and hundreds of thousands of dollars over your lifetime.

The Infinite Banking Concept (IBC) is a powerful, wealth creation, utilization and preservation process, so the benefits can be enormous. Much like learning to ride a bike, there are some who will merely dabble in banking while there are others who will embrace these concepts and produce amazing results. Learning the ins and outs of IBC can become the most beneficial financial activity you will ever engage in, requiring less time and risk than any other wealth creation activity you could engage in. While not everyone will qualify to take advantage of what IBC has to offer, those who qualify and embrace the concept will find an infinite number of ways to use the concept in their personal and professional lives.

To successfully benefit from IBC you must:

• Understand the basic concepts and know how they can work in your life.
• Have sufficient cash flow to commit to building your “banking system”. Remember, this will be your banking system that you are creating, and you need to be certain it is properly capitalized for you to be able to benefit from it. This is not a zero down, get-rich-quick approach to money and finance. Cash flow is imperative. You must be able to commit to building your bank for approximately a 5-7 year period. This means you must be a long-term thinker that is not easily swayed by the next “big” thing.
• You must continue to study and learn this new way of life and the new “Banker’s Paradigm”. The more you learn, the more you can use it, and the more you use it, the better it will serve you.

More people are doing it than meets the eye. It is gaining in popularity as more financial professionals learn of the power of this concept. Like almost anything, it takes time for ideas to catch on unless they are backed by huge marketing budgets and/or high profile media coverage.

PUA (Paid up Additions) is a rider that can be added to enhance the cash value of the life insurance contract. It is so named because this rider buys paid up insurance (death benefits) while at the same time significantly increasing the cash value of the base policy. The paid up additions rider is a single premium insurance policy that is purchased with separate premium contributions in excess of the premium required by the base policy to which the PUA rider is attached. A PUA generally has minimal cost associated with it [commissions, policy issue fees, etc.], which makes it a most efficient way to increase both the death benefit and the cash value available for use as your ‘bank.’ PUAs and base premium both create cash value and death benefits.

While PUAs can significantly increase the overall benefits of a policy, improperly understood they may also put the policy in jeopardy of becoming a modified endowment contract [MEC]. This would result in the policy losing the benefits that make cash value life insurance so powerful and flexible as a cash accumulation and cash management tool.

Whole life contracts differ from other policies like Universal, Variable Universal and Indexed Universal that may appear to be whole life but were designed for limited term usage. Much like the flawed 'buy term and invest the difference strategy', these universal policies are specifically designed to get more expensive every year. Whole life on the other hand is permanent insurance which is designed to guarantee an increase in the basic cash value each year. In the early years of most policies, the cash value increase is minimal due to the structure of the policy issue process, the long-term cash accumulation strategy, and the commission program. To facilitate early banking, the initial policy should be specifically designed, or "engineered" to create cash value in the first year.

It depends on the company, how the payments are made and how the loans are repaid, but generally it works something like this; interest on policy loans is always assessed and it is usually assessed up front and credited back as the loan is paid off. The insurance company really doesn’t care if you pay back the loan or not. They will not send you a coupon book but they will notify you at the end of each contract year if you have interest that has not been paid. If you fail to pay the outstanding interest, that interest will be tacked on to the next year’s policy loan. Therefore it is incumbent upon you to be an honest banker and make your loan payments to YOUR ADVANTAGE. The policy loan and the interest charged on the loan are liabilities against both the cash value and the death benefit. Most policies, however, continue to pay the guaranteed internal interest rate when a loan is outstanding.

In effect this means that the interest you pay the insurer is a refund of the interest the insurer credited your account while the money in your account was on loan to you. The rate the insurance company charges you is generally a bit higher than the internal rate. This is to make sure each policy owner covers the cost of managing the loan and other policy owners are not subsidizing loans in which they have no interest.

Loans and interest are often described using reference to the ‘banking’ process for simplicity. It’s important that each advisor explain how it works with individual policies and loans. It makes a great deal more sense when the policy owner can see the actual results.

Dividend-paying whole life insurance, used as a fundamental component of your personal economic system, is an extraordinarily powerful and flexible tool. It is the Swiss Army Knife of financial products and when used properly can generate wealth with very little to no Risk.