Have you ever wished you could act as your own lender instead of relying on banks and credit cards? The “Be Your Own Banker” strategy—also known as the Infinite Banking Concept—is a long-term approach that uses the cash value of a permanent life insurance policy to create a personal financing system you control. When it’s designed correctly and managed responsibly, it can become a practical tool for building liquidity, smoothing cash flow, and creating more flexibility in how you borrow and repay over time.

At Diversified Insurance Brokers, we help clients nationwide understand what this strategy is, what it is not, and how it fits into real-world planning. This approach isn’t about taking on more debt or “gaming the system.” It’s about building a pool of accessible capital, keeping your dollars working in a tax-advantaged environment, and creating options for the times when borrowing makes sense—whether that’s for a purchase, a business need, a family opportunity, or a transition year.

The phrase “be your own banker” can sound like a catchy slogan until you understand the mechanics. The core idea is simple: instead of building all your savings inside accounts you can’t easily access without penalties, tax consequences, or market timing risk, you build a portion of your long-term savings inside a properly structured permanent life insurance policy with cash value. Then you use policy loans as a financing tool while your cash value continues to grow inside the policy.

This page walks through how the strategy works, what to watch out for, and how to evaluate whether it fits your situation. We’ll also show how many people integrate it with other tools—like retirement income planning and annuities—so the strategy supports a bigger plan rather than becoming a stand-alone idea that isn’t connected to your real goals.

How the Be Your Own Banker Strategy Works

The strategy starts with a permanent life insurance policy that is designed for cash value performance—not just a large death benefit. Many people associate this approach with certain types of whole life designs because whole life typically offers guarantees and, in some cases, non-guaranteed dividends. Others use cash-value-focused universal life structures depending on goals, timeline, and risk tolerance. What matters most is that the policy is designed for liquidity and long-term stability, not built like a “one-size-fits-all” insurance policy.

When you fund a permanent policy, part of your premium goes toward the cost of insurance and policy expenses, and part of it builds equity called cash value. That cash value grows tax-deferred inside the policy. If the policy is designed efficiently, your cash value can become a meaningful pool of capital over time—something you can access without selling investments at the wrong time, without running a credit check, and without asking a bank for approval.

From there, the “banking” part begins. Instead of withdrawing your cash value (which can reduce growth and change policy dynamics), you typically borrow against it using a policy loan. In most designs, the insurance company lends you money and uses your cash value as collateral. You receive the loan proceeds, and your cash value can continue compounding inside the policy based on the policy’s crediting approach. That is one of the most misunderstood elements: you are not “taking your cash value out” in the same way you take money out of a savings account. You’re leveraging it.

Because it’s a loan, you control repayment timing and structure. There is usually no mandatory monthly payment like a car loan or mortgage. You can repay quickly, repay slowly, repay irregularly, or even repay later—though “flexibility” doesn’t mean “ignore it.” A responsible repayment approach is part of what makes the strategy work. The goal is to use the loan feature to your advantage while keeping the policy healthy and sustainable for the long run.

Over time, many people use this process repeatedly: build cash value, borrow against it for planned expenses, repay loans strategically, and keep building the cash value base. When done well, the policy becomes a stable financial tool that supports both short-term liquidity decisions and long-term legacy planning.

Why People Find This Strategy Attractive

Most borrowing options come with friction. Banks require underwriting, documentation, and approval. Credit cards can be convenient but often expensive. Loans from retirement accounts can create limited options and strict rules. Selling investments can trigger taxes and lock in market timing risk. People are drawn to the Be Your Own Banker strategy because it can reduce friction and increase control, while keeping assets in a tax-advantaged environment.

Another reason this approach resonates is psychological: it helps people think of money as a system rather than a set of separate accounts. Instead of having “retirement money” here, “emergency money” there, and “borrowed money” somewhere else, the policy can become a central liquidity tool that supports multiple parts of the plan. It’s not a replacement for everything, but it can act as a flexible hub that makes the rest of your planning feel less fragile.

It can also be useful for people who want more predictability and less dependence on market timing. When markets are volatile, the last thing many people want to do is sell investments to create liquidity. A cash value policy—especially a high-cash-value design—can provide access to capital without forcing you to choose between “need cash” and “don’t want to sell.” That optionality matters.

Key Benefits of Being Your Own Banker

The advantages of this strategy come from the combination of cash value growth, accessible borrowing, and long-term protection. Here are the benefits people typically care about most, explained in plain terms.

Tax-advantaged growth. Cash value inside a permanent policy generally grows tax-deferred, meaning you’re not paying annual taxes on the growth the way you might in a taxable brokerage account. And when policy loans are used properly and the policy stays in force, loan proceeds are generally received without income tax. That tax treatment is one of the reasons people view this strategy as a useful complement to other retirement vehicles.

Liquidity without traditional underwriting. Policy loans don’t work like bank loans. You typically do not need to prove your income, justify the purpose, or pass a credit check. You are borrowing based on collateral you already built. That can be valuable in time-sensitive moments when banks move slowly or when you simply want a more private, streamlined financing option.

Your policy can keep compounding even while you borrow. This is the feature most people hear about first, and also the feature most people misunderstand. Because you are borrowing against the policy, not withdrawing the cash value, your cash value can continue to grow within the policy structure. The specific mechanics depend on the policy type and the loan approach, but the big idea is that the “engine” doesn’t have to stop when you access capital.

Flexible repayment. Traditional loans force you into a schedule. With policy loans, you have more control over how and when you repay. That flexibility can be helpful for business owners with seasonal income, high earners with variable bonuses, or families navigating a transition year. Flexibility is a tool—when used responsibly, it can improve cash flow management.

Permanent protection. Even while you use policy loans, a permanent policy can still provide a death benefit. That matters for family protection, legacy planning, and creating a financial “backstop” for other goals. Many clients like that they’re not choosing between “saving” and “protecting.” The policy does both.

What Makes a Policy “Good” for Infinite Banking

One of the biggest mistakes people make is assuming any permanent policy will work the same way. Policy design drives outcomes. The best “be your own banker” policies are typically designed to build cash value efficiently and provide meaningful liquidity earlier than a traditional death-benefit-heavy design.

That usually means prioritizing a structure that supports stronger cash value accumulation, controlling costs where possible, and aligning the funding schedule with your realistic ability to pay premiums over time. A policy that looks great in a sales illustration but is expensive to fund consistently is not a strong banking policy. The strategy works best when you can fund it consistently and allow the cash value base to grow.

If you want to understand the building blocks, start with whole life insurance with cash value growth, because it explains the cash value concept and how policy mechanics can build equity over time. Many clients also explore whether converting an existing policy or layering with other options makes sense, which is why resources like convert term to permanent life insurance can be helpful when someone is trying to build a long-term plan without starting from scratch.

Another important point: this strategy is not about “chasing the highest return.” It’s about building a stable, tax-advantaged liquidity tool that you can use repeatedly. If you want aggressive growth, you may pursue that elsewhere in your plan. Infinite banking is typically about stability, predictability, and control.

Comparing Policy Loans to Traditional Borrowing

With a bank, borrowing begins with an application and ends with a fixed repayment schedule. The bank underwrites you, sets the terms, and enforces the rules. The process can be slow and sometimes uncomfortable. It also ties your borrowing ability to factors you can’t control, like credit scoring models, bank lending standards, and economic conditions.

With a policy loan, borrowing is tied to the cash value you have built. If your policy has sufficient available cash value, you can request a loan and receive funds without a third-party approval process. Many people like that the borrowing decision becomes internal: “Does this use of capital make sense?” rather than “Will the bank approve me?”

Policy loans also tend to be useful for planned purchases. For example, instead of financing a vehicle through a bank at a rate you don’t like, some clients borrow from the policy and then repay the policy loan on their own schedule. The goal is not to avoid interest altogether. The goal is to choose where the financing comes from, reduce dependency on outside lenders, and keep your assets positioned in a way that supports long-term planning.

Where people get tripped up is assuming policy loans are “free money.” They are not. Loan interest exists. The policy has costs. Loans reduce available cash value and can reduce the net death benefit while outstanding. The strategy works when you understand the tradeoffs, not when you ignore them. A good plan treats the policy as a powerful tool with rules—not as a magic loophole.

Understanding the Real Economics: The “Spread” Matters

At a practical level, the strategy comes down to the relationship between how your policy grows and what your loan costs. If your policy’s internal growth is strong and stable, and your loan interest is reasonable, the tool can be efficient. If the policy is poorly designed or loans are used irresponsibly, it can become expensive.

This is why we focus on expectations. A banking policy is not primarily about beating the stock market. It’s about building a reliable liquidity reservoir. That reservoir can help you avoid costly borrowing elsewhere, avoid selling assets at the wrong time, and create more control over your cash flow decisions. Those benefits are often “invisible” until you live through a year where you need flexibility.

It can be helpful to compare the strategy to other “guarantee-based” tools, like certain retirement income approaches. For example, some clients want liquid access early in life but also want guaranteed income later. That’s where coordination with tools like lifetime income strategies can create a balanced plan—liquidity now, income certainty later, with each tool doing its job.

Tax Advantages (And What to Be Careful About)

The tax advantages of permanent life insurance are one reason people integrate this strategy into a broader plan. Cash value growth is generally tax-deferred. Policy loans can generally be accessed without income tax when managed properly. And death benefits are generally paid income-tax-free to beneficiaries.

Those tax features create planning flexibility, especially for people who already have a lot of money in tax-deferred accounts and want diversification in how they access funds later. Some clients compare this with retirement tools like annuities inside IRAs. If you’re exploring how annuities fit into retirement income planning, what is an IRA annuity is a helpful baseline resource.

The main caution is that tax advantages depend on keeping the policy in good standing. If a policy lapses with an outstanding loan, a taxable event can occur. That’s why policy management matters. The strategy is not “set it and forget it.” It’s “build it correctly and manage it intelligently.” Our job is to help clients structure policies in a way that supports access and sustainability, not just initial excitement.

Who This Strategy Is Best For

The Be Your Own Banker strategy tends to work best for people who have stable cash flow, a long-term mindset, and a real desire for flexibility. It’s especially common among business owners, high-income earners, professionals with variable compensation, and families who want more private access to capital without relying on banks as heavily.

It can also be a fit for people who want to create a “family banking” mindset—building a pool of capital that can be used for opportunities, emergencies, or planned needs across time. Some people use it for business equipment purchases, real estate down payments, bridging a cash flow gap, or funding a child’s education while keeping other assets positioned for growth.

The strategy is not ideal for someone who wants a short-term solution, doesn’t want to commit to consistent premiums, or is primarily chasing the highest possible return. It can also be a poor fit if someone already has a tight budget and the premiums would create stress. A policy should add stability and optionality, not become a financial burden.

Using the Strategy for Common Real-Life Scenarios

Buying vehicles and large equipment. Many clients use the strategy to finance vehicles, equipment, or other major purchases they would normally finance through a bank. Instead of paying interest to a lender, they borrow from the policy and repay the loan over time. The benefit is control. You choose the terms, you choose the payment schedule, and you can accelerate repayment when cash flow improves.

Business opportunities. Business owners often value this strategy because it can create access to capital without negotiating with banks. That can matter when timing is critical. It can also matter when a business owner wants to keep borrowing private or prefers not to complicate financial statements with external loans.

Education funding. Some families use policy loans to cover tuition costs, especially when they want flexibility that education-only accounts don’t provide. If you’re evaluating that idea, it may help to also explore planning resources from our sister company Diversified College Planning, because the best education strategy is rarely just “how to pay.” It’s also “how to choose schools wisely” and “how to position for aid.”

Retirement flexibility. In retirement, liquidity is often about control. Many retirees don’t want every financial decision tied to market performance. A cash value policy can sometimes offer a way to access funds strategically, coordinate withdrawals, and create an additional layer of financial control. This can pair well with other guaranteed-income tools, including options discussed in lifetime income annuity options.

Integrating Infinite Banking with Annuities and Retirement Income Planning

Many clients use infinite banking as a liquidity tool while using annuities as an income tool. These serve different purposes. Infinite banking is about access and control. Annuities are often about creating a guaranteed income stream that you can’t outlive. The combination can be powerful when planned correctly, because it reduces pressure on any single account or strategy to do everything.

If you want to understand how annuity-based planning can fit into retirement decisions, explore how to transfer an IRA to an annuity and lifetime income annuity planning. These topics often come up when someone is building a plan that combines accessible liquidity with predictable future income.

Some clients also consider using a policy for liquidity and an annuity for principal protection and guaranteed growth—especially if they are trying to reduce market exposure. The key is coordination: you don’t want to overfund one tool and underfund another. You want the right balance based on your goals and your timeline.

How to “Bank” Responsibly: The Rules That Keep the Strategy Healthy

The biggest success factor in this strategy is not the illustration. It’s discipline and management. The policy should be designed properly from the start, funded consistently, and monitored. Loans should be used with intention. Repayment should be managed so the policy remains stable and the cash value base continues to grow.

Here are the practical rules we focus on with clients. We keep them simple because the strategy is already complex enough.

Don’t over-borrow. The policy is a tool, not an ATM. Borrowing should be tied to a purpose, a plan, and a repayment approach. If you over-borrow and ignore repayment, you can weaken the policy’s long-term performance.

Understand the loan mechanics. Different policies and loan types work differently. Some loans are fixed, some are variable, and the relationship between loan interest and policy growth depends on the contract. You want clarity, not assumptions.

Build your base before you lean on it. Most people get excited about “borrowing from the policy” before the policy has time to build meaningful cash value. The early years are about building the foundation. The later years are where the tool becomes more powerful.

Use the strategy as part of a plan. Infinite banking works best when it’s integrated with your broader financial picture—retirement accounts, emergency reserves, business cash flow, insurance needs, and future income planning. It’s rarely wise to treat it as a standalone “hack.”

What If You Already Have a Cash Value Policy?

If you already own a permanent policy, you may still be able to use parts of this strategy, but it depends on how the policy was designed and how it has performed. Some policies build cash value efficiently, others do not. Some have favorable loan provisions, others do not. Some are flexible, others are rigid.

In many cases, the best first step is simply a policy review. Sometimes we find that a policy can be repositioned or managed more efficiently. Sometimes we find it’s better to keep the existing policy for protection and start a separate strategy policy designed specifically for cash value and banking utility. The right answer depends on your goals, your timeline, and how much flexibility you want going forward.

If you’re also evaluating converting term insurance to permanent protection, convert term to permanent life insurance can be a helpful reference point, especially for families who want a long-term plan that doesn’t reset every time a term policy expires.

How Diversified Insurance Brokers Helps Clients Implement This Correctly

There are a lot of opinions online about infinite banking. Some are thoughtful. Some are oversimplified. Some are sales-driven. Our approach is practical: understand your goals, determine whether the strategy fits, design the policy correctly, and then build a loan and repayment approach that supports the bigger plan.

Because we work with clients nationwide and compare multiple carriers, we can focus on what matters in the contract: cash value efficiency, loan features, long-term stability, and how the policy fits your overall insurance and retirement picture. If you want to deepen your understanding of the underlying concept, the background page what is the infinite banking concept is a useful companion, and it ties directly into the core principles discussed here.

We also help clients coordinate this strategy with education planning, especially when families want to build flexible liquidity that can support college costs without forcing them into rigid account rules. For education-focused planning, Diversified College Planning can be a valuable resource for aligning “how you save” with “how you choose schools” and “how you position for aid.”

Related Topics to Explore

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What Is the Infinite Banking Concept? Whole Life Insurance with Cash Value Growth Convert Term to Permanent Life Insurance How to Transfer an IRA to an Annuity What Is an IRA Annuity? Lifetime Income Annuity Strategies Lifetime Income Annuity Options Long-Term Care Insurance Planning College Planning Strategies and FAFSA Positioning