The infinite banking concept was introduced about 25 years ago by R. Nelson Nash, who wrote a book by the same name. The idea is very interesting and could change how you decide to go about your personal finances. The overall concept is to use your money that you invest and borrow the most efficient way by eliminating third parties to the greatest possible possible.
The system begins by having you acquire an extremely specialized whole life policy from a mutual life insurance company. The reason for the mutual company will become clear as this concept is explained.
The uniqueness of this life insurance policy is that it does not emphasize the insurance component as much as it does the ability to invest funds into the policy and build the maximum cash value. This is probably the most complex part of the whole procedure since there are limits to how much and how quickly you can build up the cash value while maintaining the tax integrity of the policy. So, in this area you are advised to get professional help.
Once there are investment funds in the policy it is noticeable that you have complete control over what is done with the money as the owner of the policy. From this point, Mr. Nash would suggest that you start using the cash value to lend money back to yourself for any situation where you would have normally borrowed money from a bank or other lender. You set the repayment terms such as the rate. And, as the borrower you must repay the money just as if it were a loan to someone else.
Obviously there are substantial advantages in doing this because all the interest you would have been paying to someone else are now paying to yourself. And, as an investor, you gain because you can earn a return on your investment safely and at a higher rate than you would in many other scenarios.
As for the use of a mutual company … if you choose one that has a long and steady history of paying dividends you can receive favorable tax treatment as they pay you the returns you have earned. Only a mutual life insurance company can do this because you have become an owner in the company.
A final benefit is one somewhat unique to life insurance. The funds you place in the policy are protected from all creditors. So, check out Mr. Nash's ideas and see if you save you a lot of money over the years.
Source by Athens Scott