Blog 105 – Characteristics Of A Good Infinite Banking Policy 

Pedro Palicio On The Infinite Banking

The first step in successfully implementing the Infinite Banking Concept is to read and reread Nelson Nash’s book “Becoming Your Own Banker” as many times as necessary until it becomes obvious to you that you should control 100% of your financing needs.

Then, and only then, you should concentrate in studying the characteristics of a good Infinite Banking policy by inspecting an illustration from the insurance company you plan to use. It is important to remember that an illustration provides a snapshot or projected future policy performance. Actual performance may be more or less favorable than the original illustration. Let’s now analyze policy characteristics in no specific order.

Policy Design or what percentage of the premium payment goes to the base policy and its term insurance and what percentage goes to the Paid-Up Additions rider. In general, the higher percentage going to the Paid-Up Additions rider, the more cash value the policy generates in its early years.

Cash Value Efficiency has two components: annual break-even and cumulative break-even. Annual break-even is the year in which the increase in cash value is equal to or greater than the premium payment during that year. It can be as early as the second policy year, depending on how it is funded. The Annual Cash Value Efficiency tells you how efficient the premium payment is in generating cash value for each specific year. Cumulative break-even is the year in which the total cash value at the end of the year is equal to or greater than the total premiums paid up to that year. It is also called the capitalization period and it is the year when the IBC policy becomes profitable. The earlier the cumulative break-even, the more cash value efficient the policy is.

Tax-Free Retirement Income tells how much in tax-free retirement income could be obtained from the IBC policy for several years. Let’s say for 20 years, or from age 71 through age 90. It is important to notice that an IBC policy is much more efficient in generating retirement income than a qualified plan since with a qualified plan you would have to withdraw a higher amount so that when taxes are paid, you end up with the same amount than the IBC policy. Also, it can measure how much bigger the total retirement income is when compared to the total premiums paid. 

Flexibility of the Paid-Up Additions rider tells us how much in unscheduled PUA payments can be made every year without the IBC policy becoming a Modified Endowment Contract or MEC. Be aware that with some insurance companies this amount can be cumulative if the maximum amount is not paid every year. It is an excellent way to increase the cash value efficiency of your IBC policy.

Dividend Interest Rate is declared every year by mutual life insurance companies. It is important to know how much is declared on borrowed funds and how much on non-borrowed funds.

Policy Loan Interest Rate tells you if the loan interest rate is fixed or variable and when it might change.

When we design for you a dividend-paying whole life insurance policy that satisfies the Infinite Banking Concept as described by Nelson Nash, you can be sure that that policy is the most-efficient whole life policy that can be designed for that insurance company and for the premiums that you are paying. We define most efficient by the ability to generate the most cash value, not only in amount but also in time.

If you would like to learn how you can grow a substantial amount of cash that you have access to at any time without penalties, is unrelated to the stock market, and will generate income that is not included in your tax return, visit our website at  or feel free to email us your questions at or call us toll-free at 1-844-443-8422.

Isis B. Palicio, LUTCF, MBA
Pedro A. Palicio, MBA, Ph.D.
Infinite Banking Concepts® Authorized Practitioners

We are experts in designing high cash value dividend-paying whole life policies.

Call Now Button