How Does Infinite Banking Work?

The equity, or cash value(s) specific to whole life insurance policies, serve as collateral for all policy loans. So long as premiums are current, the policyholder simply calls the insurance company and requests a loan against their equity. The insurer on the phone won’t ask what the loan will be used for, what the income of the borrower (i.e., policyholder) is, what other assets the person might have to serve as collateral, or in what timeframe the person intends to pay back the loan. 

In contrast to term life insurance products, which cover only the beneficiaries of the policyholder in the event of their death and for a specified period of time, whole life insurance covers an individual’s entire life. And when structured properly, whole life policies generate a unique access to cash that can also increase the equity in the policy over time.