The Be Your Own Banker Strategy Explained
Jason Stolz CLTC, CRPC
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—helps you do just that. It’s a long-term financial approach that uses the cash value of a permanent life insurance policy to create a personal financing system you control.
At Diversified Insurance Brokers, we help clients nationwide understand how to use the benefits of life insurance strategically. This approach isn’t about taking on more debt—it’s about building liquidity, earning interest on your own money, and using tax-advantaged tools to strengthen your retirement and legacy planning.
How the Be Your Own Banker Strategy Works
When you purchase a permanent life insurance policy—typically high cash value life insurance—a portion of your premium builds equity called cash value. That balance grows tax-deferred, often with guaranteed minimum growth and potential dividends.
Over time, this creates a powerful financial tool. You can borrow against your policy’s cash value for major expenses—like buying a car, funding a business, or covering college costs—without needing bank approval or credit checks. The best part? Your cash value continues to grow even while you borrow against it, because you’re using the policy’s loan feature rather than withdrawing your funds.
Key Benefits of Being Your Own Banker
- Tax-Advantaged Growth: Your cash value grows tax-deferred, and policy loans are generally tax-free when managed properly.
- Access to Liquidity: Borrow from yourself anytime, without traditional loan underwriting.
- Earn Interest While Borrowing: Your full cash value keeps compounding even when used as collateral for loans.
- Flexible Repayment: Unlike bank loans, you decide when and how to repay—there are no mandatory schedules.
- Permanent Protection: Your life insurance still provides a death benefit for your family or estate, even while you use the cash value.
This combination of protection, growth, and control makes the strategy appealing for entrepreneurs, high-income earners, and long-term savers who want flexibility beyond traditional financial products.
Comparing Life Insurance Loans to Traditional Borrowing
With a bank, you apply for credit, submit financial statements, and hope for approval. With your policy, you can request a loan directly from the insurer—often in a few business days—using your own funds as collateral. The loan interest you pay goes back to the insurer, not a third party, and your underlying cash value continues to grow uninterrupted.
That’s why many people use this strategy as part of a broader wealth plan. It offers predictable growth, liquidity, and optionality in retirement—without relying solely on market returns.
Tax Advantages of the Be Your Own Banker Strategy
The structure of a cash value policy provides several unique tax benefits:
- Cash value accumulation grows tax-deferred.
- Policy loans are tax-free as long as the policy remains in force.
- Death benefits are typically income-tax-free to beneficiaries.
These benefits make the concept an attractive complement to other retirement vehicles such as IRA annuities or 401(k)s, offering both liquidity and tax diversification.
Who Is This Strategy Right For?
The Be Your Own Banker strategy isn’t for everyone. It’s most effective for those who:
- Want long-term control over their money instead of relying on banks
- Have stable cash flow to fund consistent premium payments
- Value liquidity and tax-advantaged growth
- Seek to create a private banking system for family or business use
If you already own a cash value policy, you may be able to reposition or enhance it for this strategy. Our fiduciary advisors can review your current coverage and design a structure tailored to your goals.
Integrating with Other Financial Tools
Many clients use this approach alongside annuities or lifetime income strategies to balance liquidity with guaranteed future income. It also complements long-term care insurance, ensuring access to funds for unexpected medical needs without disrupting retirement income.
Building Your Own Banking System Responsibly
Being your own banker doesn’t mean skipping professional advice. The strategy requires proper policy design and disciplined management to avoid lapses or tax issues. Our advisors help you structure your coverage, monitor cash value performance, and implement a sustainable loan-repayment approach that keeps your plan efficient.
Explore Whether the Be Your Own Banker Strategy Is Right for You
Our fiduciary advisors can show you how to leverage life insurance for tax-advantaged growth and financial control—without hidden fees or gimmicks.
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FAQs: The Be Your Own Banker Strategy
What is the Be Your Own Banker strategy?
It’s a financial concept that uses cash value life insurance to create a personal banking system, letting you borrow against your own policy for liquidity and growth.
Is this the same as Infinite Banking?
Yes, Infinite Banking is a common name for the same concept. It emphasizes self-financing through life insurance rather than traditional debt.
What type of policy is used?
Typically, participating whole life or indexed universal life insurance is used because both accumulate cash value and allow policy loans.
Are policy loans taxable?
No, policy loans are not taxable as long as the policy remains in force and does not lapse or exceed basis limits.
Can I still earn dividends while using the cash value?
Yes, your cash value continues to grow and earn dividends or credited interest even when you have an outstanding policy loan.
Who is this strategy best suited for?
It’s ideal for disciplined savers, business owners, and families seeking long-term liquidity, tax benefits, and control over their capital.
About the Author:
Jason Stolz, CLTC, CRPC, is a senior insurance and retirement professional with more than two decades of real-world experience helping individuals, families, and business owners protect their income, assets, and long-term financial stability. As a long-time partner of the nationally licensed independent agency Diversified Insurance Brokers, Jason provides trusted guidance across multiple specialties—including fixed and indexed annuities, long-term care planning, personal and business disability insurance, life insurance solutions, and short-term health coverage. Diversified Insurance Brokers maintains active contracts with over 100 highly rated insurance carriers, ensuring clients have access to a broad and competitive marketplace.
His practical, education-first approach has earned recognition in publications such as VoyageATL, highlighting his commitment to financial clarity and client-focused planning. Drawing on deep product knowledge and years of hands-on field experience, Jason helps clients evaluate carriers, compare strategies, and build retirement and protection plans that are both secure and cost-efficient.
