The Infinite Banking Concept (IBC)

The Infinite Banking Concept (IBC) is the creation of Nelson Nash, who wrote the bestselling book Becoming Your Own Banker. For full details see the website of the Nelson Nash Institute as well as the videos as its YouTube channel, but here we will provide a very brief introduction.

Nash teaches his readers to “become their own banker” by taking control of the banking function in their lives. Through the use of a properly designed, dividend-paying whole life policy, individuals can manage cashflows within their own property without relying on outside commercial banks or other institutional lenders.

Specifically, individuals can build up large “cash surrender values” in one or more whole life policies. Then when they need to make a large purchase, such as a new car or funding a wedding, people practicing IBC will call the insurance company and take out a policy loan. This is a side loan from the insurance company, with the cash surrender value of the life insurance policy acting as collateral.

For various reasons (some of which are discussed in greater detail in this essay), the terms of loans from a life insurance company are much more flexible than from a traditional lender. For one thing, because the life insurance is the collateral, it means that if the new car buyer hits a tough patch and can’t make his “car payment” for a few months, nobody shows up to repossess the vehicle. We (Lara and Murphy) in our book How Privatized Banking Really Works explain the bigger picture, and argue that it is much more conservative to move assets out of the Wall Street / commercial bank nexus and into the life insurance sector.

At the personal level, practicing IBC promotes a lifetime of disciplined saving and prudential avoidance of government-sponsored retirement accounts with their paternalistic rules. However, before making any financial decisions, individuals should first read Nash’s book and then discuss options with an authorized IBC Practitioner.

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