Infinite Banking Concept

Infinite Banking Concept (IBC) is a personal finance strategy and banking alternative that uses specially designed whole life insurance policies as a private financing system for individuals. Advocates of IBC promote the idea of "becoming your own banker" by accumulating cash value in a dividend-paying permanent life insurance policy and then borrowing against that value for one’s financial needs instead of relying on traditional bank loans. The concept was introduced in the 1980s by insurance agent R. Nelson Nash and detailed in his 2000 book, Becoming Your Own Banker. Proponents claim that IBC allows individuals to recapture interest payments and gain financial control by self-financing purchases, while critics argue it is a complex and expensive approach that benefits insurance companies and agents more than policyholders. The Infinite Banking Concept remains a subject of debate in financial circles, with a dedicated following of practitioners alongside substantial skepticism from mainstream financial advisors.

History

The Infinite Banking Concept was developed by R. Nelson Nash (1931–2019) in the early 1980s. Nash conceived the idea after encountering financial strain from high interest rates on bank loans, which prompted him to leverage the cash value of his whole life insurance policies for personal financing. A career life insurance agent with a background in forestry and an interest in Austrian economics, Nash synthesized these experiences into a strategy for “personal banking” using life insurance. He began teaching the concept through seminars in the late 1980s and 1990s.

In 2000, Nash self-published Becoming Your Own Banker: Unlock the Infinite Banking Concept, a short book outlining the IBC principles. The book gained a grassroots following and Nash updated it in multiple editions throughout the 2000s. In it, Nash argued that individuals could create a “private banking system” by building up cash surrender value in participating (dividend-paying) whole life insurance and then borrowing against it for major expenses, thereby “paying interest to themselves” rather than to banks. Nash’s ideas drew on his study of economic cycles and distrust of the fractional reserve banking system, resonating with some proponents of Austrian School economics.

Over the following decades, IBC spread through a network of financial professionals and workshops. Nash founded Infinite Banking Concepts, LLC and an associated practitioner program to train insurance advisors in the method. In 2010, economist Robert P. Murphy and financial consultant L. Carlos Lara co-authored How Privatized Banking Really Works, integrating Nash’s banking concept with free-market economic theory. An industry grew around IBC, including the Nelson Nash Institute (formerly Infinite Banking Institute) which promotes the concept’s education. Nash’s work was recognized in some economic circles – for example, the Foundation for Economic Education gave him an award in 2018 for his contributions to financial education. Nash continued to lecture on IBC until his death in 2019, after which followers have carried on his legacy through institutes, podcasts, and seminars.

Principles

IBC centers on the cash value component of a whole life insurance policy and its unique loan features. A whole life policy accumulates cash value (equity) over time, growing at a contractually guaranteed rate with potential dividends if issued by a mutual insurer. Policyholders can borrow against their cash value via policy loans, typically at relatively low interest rates, while the underlying cash value continues to earn interest and dividends (in the case of non-direct recognition policies). This mechanism allows the policyholder to access liquidity for purchases or investments without surrendering the policy. In essence, the life insurance policy functions as a personal bank: the individual’s premium payments build a pool of capital that can be collateralized for loans back to the owner.

Key principles of the Infinite Banking Concept include:

• High Cash Value Life Insurance – IBC uses specially structured whole life policies (and sometimes other permanent life insurance like universal life) designed to maximize cash accumulation. Policies are often “overfunded” (within IRS limits) by paying more than the minimum premium and adding Paid-Up Additions riders, which accelerate cash value growth. These policies are issued by insurers with strong dividend-paying histories, as the dividends contribute to increasing cash value over time.
• Policy Loans – Rather than withdrawing money, policyholders borrow from the insurer with the policy’s cash value as collateral. There is no fixed repayment schedule for a policy loan; the borrower can repay on their own terms or even just pay interest, as long as the loan balance plus interest does not exceed the cash value. If a loan is outstanding, interest accrues annually. Advocates note that the loan feature provides flexibility and privacy – no credit check or bank approval is needed, and if structured properly the policy can continue growing while loans are in effect. However, any unpaid loan balance is ultimately deducted from the death benefit if not repaid.
• “Becoming Your Own Banker” – IBC proponents emphasize treating the policy loan as if it were a real bank loan. They encourage policyholders to repay their policy loans with interest (essentially “paying oneself back”). The concept is that by recapturing the principal and interest into one’s own policy, the money eventually can be reused (creating an “infinite” financing cycle) and the individual builds wealth that would otherwise have been lost to external lenders. Nash outlined “rules” such as paying premiums faithfully, not draining the policy, and thinking long-term to create a family banking system.
• Tax Advantages – Properly structured life insurance offers several tax benefits that IBC leverages. Cash value growth in a life policy is tax-deferred (and can be tax-free if funds are accessed via loans rather than withdrawals). Policy loans themselves are not considered taxable income as long as the policy remains in force, and the death benefit paid to beneficiaries is generally income-tax free. Additionally, whole life policies can be structured to avoid becoming a Modified Endowment Contract (MEC); avoiding MEC status ensures that loans and withdrawals maintain their favorable tax treatment under U.S. tax law. IBC advocates highlight that, unlike bank savings or investments, the life policy’s earnings are not reportable annually on income taxes. (On the downside, interest paid on policy loans is not tax-deductible, unlike some mortgage or business loan interest.)
• Policy Structure and Costs – A critical aspect is designing the policy for high cash value and efficiency. IBC practitioners typically reduce the base death benefit and increase paid-up additions to minimize insurance costs and maximize cash accumulation. Because whole life insurance can be expensive, a large upfront commitment is often required – advocates commonly suggest funding ~10% or more of one’s income into the policy for it to work as a banking vehicle. Policy expenses and agent commissions are front-loaded, meaning cash value in the first years is low relative to premiums paid. It may take several years (often 5–10 years) before the policy’s cash value grows sufficiently to make substantial loans (“capitalization phase”). IBC proponents view this patience as building one’s personal bank capital.

In practice, an individual implementing Infinite Banking might use their policy loans to finance things like purchasing cars, investing in a business or real estate, paying for education, or emergency expenses – then repay those loans on a schedule of their choosing. Proponents claim this allows one to capture interest that would otherwise be paid to banks, and to potentially borrow money at lower effective rates and with less hassle than traditional loans. They also note that during times when credit is tight or banks are unwilling to lend, a policy loan provides guaranteed access to liquidity as long as the policy is in good standing. Additionally, the whole life policy provides a death benefit and lifelong insurance coverage as a side benefit to the “banking” function.

Notable advocates

Since its introduction, the Infinite Banking Concept has attracted a niche but enthusiastic group of advocates, including financial authors, economists, and insurance professionals who promote the strategy in books and media. Notable proponents include:

R. Nelson Nash – The originator of IBC and author of Becoming Your Own Banker (2000). Nash spent over 30 years as a life insurance agent and formulated IBC as a solution to his own debt problems in the 1980s. He traveled throughout North America giving seminars on “becoming your own banker,” and founded the Nelson Nash Institute to continue IBC education. Nash’s book has sold over 500,000 copies and is now in its 5th edition, inspiring a dedicated following of advisors and clients. He is widely regarded as the pioneer of the infinite banking movement.

Robert P. Murphy – An Austrian School economist and author who became a leading advocate of IBC. Murphy co-authored several works on the subject, notably How Privatized Banking Really Works (2010) and The Case for IBC (2019), alongside Nash and L. Carlos Lara. He also helped develop the IBC Practitioner Program. Murphy argues that IBC offers a form of privatized banking that dovetails with free-market principles. He has discussed infinite banking in economics forums and podcasts, emphasizing its use of dividend-paying whole life as a “cash management tool” and alternative to fractional-reserve banking.

L. Carlos Lara – A financial consultant and co-author (with Murphy and Nash) of works on Infinite Banking. Lara, together with Murphy, published a regular newsletter and podcast (the "Lara-Murphy Report") discussing IBC in the context of business finance and economic theory. He has been active in educating business owners about using IBC for corporate finance and was a founding board member of the Nelson Nash Institute.

David Stearns – An insurance industry professional who succeeded Nash as the president of Infinite Banking Concepts, LLC. Stearns was a close associate of Nash and contributed to the expansion of practitioner training in the IBC methodology. He is often cited as helping to systematize Nash’s program for life insurance agents and continues to speak at Infinite Banking conferences.

Pamela Yellen – A financial author and educator who advocates a concept similar to IBC, branded as "Bank On Yourself." After learning of Nash’s methods in 2001, Yellen became a proponent of using high-cash-value life insurance for self-banking. She has written two New York Times best-selling books – Bank On Yourself (2009) and The Bank On Yourself Revolution (2014) – which brought mainstream attention to the idea of borrowing against life insurance for financing needs. Pamela Yellen portrays the strategy as a safe wealth-building alternative to stock market investing, and has been featured in outlets like the Wall Street Journal and Entrepreneur as a consumer finance advocate.

Sean Dempsey – An entrepreneur and investor who publicly champions the Infinite Banking Concept as a cornerstone of his wealth strategy. Dempsey credits IBC with allowing him to finance business ventures and real estate investments through his own life insurance “bank.” In 2024 he authored The Investor’s Warp Whistles, a book discussing creative financial strategies, in which he highlights his experiences with infinite banking. He has shared his IBC success story in interviews and podcasts, and is noted as a practitioner of Nelson Nash’s methods. Dempsey’s advocacy bridges the worlds of real estate investing and IBC, illustrating the concept’s application for passive income generation.

Garrett Gunderson – A financial strategist and CEO of Wealth Factory, known for promoting concepts of cash flow banking that align with Infinite Banking. Gunderson’s book What Would the Rockefellers Do? (2016) discusses how wealthy families use life insurance to create multigenerational wealth, and he frequently speaks about strategies akin to IBC in media appearances. He emphasizes using whole life policies as a stable funding source and has called infinite banking a means to “rediscover the power of dividends and guaranteed growth” inside insurance contracts. Gunderson’s work, including the earlier bestseller Killing Sacred Cows, has introduced the IBC philosophy to a broader entrepreneurial audience.

Patrick Donohoe – Author of Heads I Win, Tails You Lose (2018), Donohoe advocates a wealth strategy heavily influenced by IBC principles. He founded Paradigm Life and hosts a podcast where he discusses alternative investment strategies, including the use of whole life insurance for personal banking.

Jeffrey Reeves – Financial educator and author of Money for Life, Reeves promotes a “family banking” model similar to IBC, positioning whole life insurance as a tool for generational wealth transfer and capital access.

Mark Benson – Founder of the Infinite Banking Coaches network, Benson has worked to expand practitioner training for financial advisors interested in implementing IBC models.

Kim D. H. Butler – A Certified Financial Planner and founder of Partners for Prosperity, Butler promotes Prosperity Economics, an investment philosophy that includes the use of IBC-style whole life insurance structures as a cornerstone strategy.

Barry Dyke – Author of The Pirates of Manhattan, Dyke has written extensively on the risks of Wall Street-based investing and advocates permanent life insurance as a safer alternative, echoing IBC themes in his public talks and financial writing.

Criticism

The Infinite Banking Concept has faced significant criticism from financial experts, consumer advocates, and journalists who caution that it is often oversold and may not be suitable for most people. Skeptics emphasize the following drawbacks:

• High Costs and Fees: Whole life insurance – the cornerstone of IBC – is considerably more expensive than term life insurance, and those high premium costs can diminish or even outweigh the benefits of the strategy. For example, a healthy 40-year-old might pay on the order of $6,000–$8,000 per year for a $500,000 whole life policy, whereas an equivalent term policy could cost only a few hundred dollars. Critics argue that the heavy insurance expenses, sales commissions, and fees in the early years of a whole life policy make it an inefficient savings vehicle, especially compared to traditional investments. Money that goes toward insurance costs is money not being invested elsewhere; this led financial columnist Jane Bryant Quinn to dub such schemes “snake oil with a cash value.”
• Slow Build-Up of Value: Detractors note that it typically takes many years for a whole life policy’s cash value to grow to a useful size. In the initial years, most of the premium goes toward insurance costs and agent commissions, leaving little cash value. If one starts an IBC policy and then needs liquidity early on, there may be insufficient cash value to borrow against. Personal finance advisors often point out that there is a significant opportunity cost: the same dollars, if invested in conventional retirement accounts or index funds, might yield higher returns over time. Given that it can take a decade or more of commitment before the “banking” strategy gains momentum, many individuals lose patience or cannot keep up the required premiums.
• Overfunding and Commitment: The strategy requires disciplined and substantial contributions. To emulate a banking system, policyholders must intentionally overfund their policies (within legal limits) to maximize cash value, often committing a large portion of their income to premiums. Those without strong cash flow may find it hard to sustain the necessary funding. If the policyholder cannot continue making large premium payments, the policy could lapse or be forced into a reduced benefit, negating the intended advantages. Furthermore, if a policy is inadvertently funded beyond IRS guidelines, it can become a Modified Endowment Contract, losing many tax benefits and causing loans to be taxable – a trap that can catch unwary consumers.
• Complexity and Risk of Mismanagement: Infinite banking is often described by critics as complex and counter-intuitive. It requires careful management of policy loans and vigilant monitoring of the policy’s performance. Unlike a straightforward bank loan with fixed terms, a policy loan’s interest can compound and, if unpaid, can eventually consume the policy’s value. If a policy loan plus interest ever exceeds the cash value, the policy can lapse, triggering a tax bill on the gains as well as loss of coverage. Consumer Reports and others have warned that policyholders may not fully understand these risks when an insurance salesperson pitches the concept. The need to “borrow from yourself and pay yourself back” is itself an unusual discipline – if one fails to repay their policy loans, the concept fails to deliver the promised benefits. Financial regulators have advised consumers to be wary of any concept that is marketed as a virtually consequence-free source of funds.
• Alternative Strategies: Many financial planners argue that for most individuals, traditional approaches are more efficient. The common advice to “buy term life insurance and invest the difference” is often presented as a simpler, more transparent way to achieve similar goals. Rather than tying up capital in an insurance policy, one could purchase cheaper term coverage for protection and invest the remaining money in diversified assets (such as index funds, IRAs, or 401(k)s) which historically may yield better returns. These investments also provide liquidity (though without the ability to borrow against a fixed value as with a policy). Critics also note that paying interest to a bank on a low-rate loan might be financially preferable to paying (often higher) interest to an insurance company on a policy loan – particularly since mortgage or student loan interest can be tax-deductible, whereas policy loan interest is not. In sum, detractors see IBC as an unnecessarily convoluted method that, in a best-case scenario, roughly mimics the outcomes of more straightforward financial planning techniques, and in a worst-case scenario could leave policyholders with expensive insurance and little to show for it.

Financial celebrity Dave Ramsey is one of the outspoken critics of infinite banking. He has repeatedly referred to IBC as “a scam” and famously called it “a load of manure” on his radio show, arguing that it’s a gimmick pushed by insurance agents to earn high commissions. Ramsey and others contend that the math behind IBC doesn’t work out favorably for the consumer once the hefty insurance costs are accounted for, and they caution that claims of tax-free retirement income via policy loans are misleading. Other consumer finance columnists, like Suze Orman and Clark Howard, likewise advise the public to be extremely skeptical of any plan that requires buying expensive permanent life insurance as an investment. Regulators have also kept an eye on insurance-based schemes; while IBC is legal, authorities warn that consumers should fully understand the contract terms and worst-case scenarios. In a 2020 interview, a spokesperson for the National Association of Insurance Commissioners noted that policyholders considering such strategies need to ask: “Who truly benefits here – the customer, or the person selling the policy?”

In response to the criticism, proponents of Infinite Banking acknowledge that the strategy requires discipline and a long-term outlook, but they maintain that for those who properly implement it, the benefits (guaranteed growth, accessible liquidity, and tax advantages) justify the costs. They argue that critics often misunderstand or oversimplify IBC, and note that the concept is not a get-rich-quick scheme but a way to mimic the conservative financial practices of banks and wealthy individuals. Nonetheless, mainstream financial advisors generally recommend IBC only, if at all, for high-net-worth or high-income individuals who have maxed out other tax-advantaged savings and seek additional avenues for stable, long-term growth. For the average consumer, the consensus among most certified financial planners and academics is that infinite banking is an unnecessary complication, and they urge careful due diligence before committing to this strategy.

Influence

In addition to its originator R. Nelson Nash, the Infinite Banking Concept has been advanced by several authors, economists, and financial consultants. People who have written about or promoted IBC include:

• Robert P. Murphy, a Ph.D. economist affiliated with the Mises Institute, co-authored How Privatized Banking Really Works and The Case for IBC alongside Nash and L. Carlos Lara.
• L. Carlos Lara, a financial consultant and frequent speaker at IBC conferences, co-authored several texts supporting IBC implementation and served as a board member of the Nelson Nash Institute.
• Pamela Yellen, a former financial advisor, popularized a variation of the strategy under the term "Bank On Yourself." .
• David Stearns, Nash’s longtime associate, managed operations for the Nelson Nash Institute and helped formalize the Authorized IBC Practitioner Program.
• Sean Dempsey has written fiction and nonfiction incorporating themes derived from IBC principles.
• Kim D. Butler, founder of Prosperity Economics and author of Live Your Life Insurance, has frequently endorsed IBC strategies as part of a broader financial independence model.
• Barry Dyke, author of The Pirates of Manhattan, has defended the use of cash value life insurance and criticized the conventional financial services industry, often citing IBC principles.
• James C. Neathery, a licensed practitioner and media host, is known for his work on IBC implementation and online educational content via the Banking With Life series.
• Ray Poteet, founder of Alpha & Omega Financial Services, was an early adopter of Nash’s teachings and has helped structure IBC policies for rich people.
• Brandon Langdon, Chris Bay, Mark Benson, Patrick Donohoe, and Brent Kesler are among a newer generation of IBC educators and insurance-based financial strategists who teach Nash's concepts through webinars, podcasts, and national speaking engagements.

These individuals have contributed to the expansion of IBC literature and have launched firms and training programs focused on whole life insurance-based wealth strategies. While not all of them have achieved mainstream academic recognition, they form the backbone of the modern IBC practitioner network.

Further reading

• Nash, R. Nelson. Becoming Your Own Banker. Infinite Banking Concepts, 2000. ISBN 978-0972631617.
• Murphy, Robert P., and Lara, L. Carlos. How Privatized Banking Really Works. Infinite Banking Concepts, 2010. ISBN 978-0982336612.
• Murphy, Robert P., Lara, L. Carlos, and Nash, R. Nelson. The Case for IBC. Nelson Nash Institute, 2015.
• Yellen, Pamela. The Bank On Yourself Revolution. BenBella Books, 2014. ISBN 978-1939529305.
• Dyke, Barry. The Pirates of Manhattan. 2007.
• Butler, Kim D. Live Your Life Insurance. Partners for Prosperity, 2006.