Understanding Infinite Banking: A Glossary of Key Terms

The Infinite Banking Concept (IBC) can feel overwhelming when you’re first learning about it. There’s a lot of jargon thrown around—cash value, policy loans, compound interest—and it can sound more complicated than it is. But don’t worry, I’ve got you covered. In this post, I’ll break down the key terms you need to know to make Infinite Banking clearer and more approachable.

Whether you’re just starting your journey or brushing up, this glossary will help you understand the building blocks of IBC and how they work together to create financial freedom.

Key Infinite Banking Terms

1. Cash Value

The cash value is the “living” part of your whole life insurance policy. It’s the money you’ve built up over time, which you can borrow against or withdraw. Think of it as your personal bank account within the policy that grows with every premium payment.

2. Whole Life Insurance

This is the type of insurance policy used for Infinite Banking. Whole life insurance is a permanent policy that provides both a death benefit for your beneficiaries and a cash value component that grows over time.

3. Policy Loan

A policy loan is money you borrow against the cash value of your whole life insurance policy. The loan comes from the insurance company, but it’s secured by your policy’s cash value. You’re essentially borrowing from yourself, and your cash value keeps growing even while the loan is outstanding.

4. Compound Interest

Compound interest is what makes IBC so powerful. Your cash value grows based on compound interest, meaning you earn interest on both your initial contributions and the interest that has already accumulated. This uninterrupted growth continues even when you borrow against your policy.

5. Dividend

Dividends are payments made by mutual life insurance companies to policyholders. These are essentially a share of the company’s profits, which can be used to increase your policy’s cash value, reduce premiums, or even taken as cash.

6. Premium

Your premium is the amount you pay regularly to keep your whole life insurance policy active. Part of this payment goes toward the death benefit, and part goes into the cash value. With IBC, you typically fund your policy with higher premiums to accelerate cash value growth.

7. Death Benefit

The death benefit is the amount your beneficiaries receive when you pass away. While this is important for legacy planning, the focus of IBC is often on leveraging the cash value while you’re alive.

8. Uninterrupted Growth

This term refers to the ability of your cash value to continue growing with compound interest, even when you take out a policy loan. This uninterrupted growth is one of the biggest advantages of Infinite Banking.

9. Overfunding

Overfunding means paying more than the minimum premium to maximize your policy’s cash value growth. It’s a common strategy in Infinite Banking to build wealth faster.

10. Mutual Life Insurance Company

A mutual life insurance company is owned by its policyholders, not shareholders. This structure allows the company to pay dividends to policyholders, which is why these companies are preferred for IBC.

Conclusion

Understanding the language of Infinite Banking is the first step to unlocking its potential. Terms like “cash value,” “compound interest,” and “policy loan” aren’t just financial jargon—they’re tools that help you take control of your money.

By mastering these concepts, you’ll see how Infinite Banking works as a system for building wealth, funding major purchases, and creating a financial legacy. Take it one term at a time, and soon enough, you’ll feel confident navigating the world of IBC.

Ready to learn more or dive deeper? Start by reviewing your own financial goals and seeing how these terms apply to your situation. The more you understand, the more empowered you’ll be to make this system work for you.