Infinite Banking Calculator (2026): How Much Can Your Whole Life Policy Bank?
Infinite banking is the practice of funding a dividend-paying whole life policy heavily enough that its cash value becomes a usable pool of capital — money you borrow against, repay on your own schedule, and recycle back into the policy. The idea is simple to describe and surprisingly hard to see numerically, because three moving parts fight over the same dollars: the premium you pay, the cash value the policy credits, and the loan interest charged on the way back out.
This calculator models all three. Set your annual premium, the growth rate you expect, the loan-to-value your carrier allows, the policy loan rate, and the rate a bank would charge you for the same money. The tool then reports your banking capacity (how much you can actually borrow at a given year), the policy loan interest, the growth your cash value keeps earning while the loan is outstanding, and the honest comparison against a bank or HELOC at today’s rates.
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Your policy as a bank
Banking capacity result
Banking on yourself saves moneyAt year 10 you can borrow $194,254 of your $215,838 cash value. A $100,000 loan for 7 years costs $38,500 in policy loan interest versus $66,500 at the bank.
Available to borrow at year 10 – that is 107.9% of the $180,000 you paid in.
Cash value at that year
Grows tax-deferred and is not reduced by taking a policy loan.
Growth preserved on the borrowed money
Your cash value keeps compounding on the full balance while the loan is outstanding.
Interest saved versus the bank
Policy loan interest $38,500 against bank interest $66,500 over 7 years.
Premium recapture year
The year cash value first exceeds everything you have paid in.
Growth, tax-equivalent
The pre-tax taxable return you would need to match 4.5% tax-deferred at a 24% bracket.
Requested loan fits inside your capacity, so the full amount is modeled.
How to read the results
The headline number is your banking capacity at the year you chose: the maximum the policy can lend, not the amount you asked for. If the request exceeds capacity the badge turns gold and the tool models the maximum the policy supports, because a carrier cannot lend more than the cash value secures. The two bars compare your capacity against cumulative premiums and your policy loan cost against the bank alternative; a capacity bar pinned at 100 percent means the policy has fully recaptured its premiums.
The savings card is the number most people actually came for, and it is deliberately unsentimental. It subtracts policy loan interest — plus foregone growth when you switch the dividend toggle off — from what the same loan would cost at the bank rate you entered. If it goes negative, the page will say so in plain language. That honesty is the point: infinite banking works well at a 5.5 percent policy loan rate against a 9.5 percent bank rate and stops working when the spread narrows or the carrier stops crediting dividends on collateral.
Finally, the tax-equivalent card converts the policy’s tax-deferred growth into the taxable return an ordinary account would need to match it. At a 4.5 percent internal rate and a 24 percent bracket, the equivalent taxable return is 5.92 percent. That is the fair way to compare a policy against a brokerage account, and it is a comparison that ignores the acquisition cost paid in the early years — which is exactly why the capacity bar starts below 100 percent in year one.
For the coverage side of the household plan, start with our policy loan guide if you already own permanent coverage, or size your protection need first and treat the banking policy as a separate decision.
What the infinite banking calculator measures
Most life insurance calculators answer one question: how much coverage do I need? This one answers a different question: if I treat my permanent policy as a banking system, what does that system actually support? That requires four outputs that no coverage calculator produces.
- Banking capacity — the dollar amount available to borrow at a chosen policy year, computed as your cash value multiplied by the loan-to-value your carrier permits (usually 85 to 92 percent of cash value for a well-funded mutual whole life policy).
- Premium recapture — the year your cash value overtakes the total premiums you have paid in. Before that year, borrowing from the policy is really just taking your own money back with interest attached.
- Policy loan cost versus bank cost — total interest paid on a policy loan compared with the total interest on a personal loan, auto loan, or business line at the rate a lender would charge you for the same term.
- Growth preserved on the borrowed collateral — the cash value continues to earn dividends and interest on money you have borrowed, at carriers that credit dividends on the full cash value rather than only the unencumbered portion. That single contract detail swings the math more than any other input.
Everything else in the policy — the death benefit, the premium structure, the riders — is context for those four numbers. That is why the tool asks for your own contract values instead of quoting rates: infinite banking outcomes are driven by the illustration your carrier issued, not by an industry average.
How the banking engine works
The engine builds the policy year by year. Start with your annual premium. Year one credits the first-year cash value percentage you specify — for a maximally funded policy with a paid-up additions rider, that is typically 75 to 90 percent of the premium after acquisition costs. Every later premium year is credited at 100 percent, because the load has already been paid. Then the entire cash value balance compounds at your expected growth rate each year: dividends plus interest for a mutual whole life policy, generally between 4 percent and 6 percent in the current rate environment.
From cash value to borrowing capacity
Cash value is not the same as borrowing capacity. Carriers lend against a percentage of it, and that percentage is a contractual term in your policy. At the calculator’s defaults — $18,000 a year for ten years at a 4.5 percent growth rate with an 80 percent first-year cash value — the policy accumulates about $215,838 of cash value by year ten. At a 90 percent loan-to-value, that supports roughly $194,254 of borrowing capacity. In other words, after ten years the policy can lend you slightly more than the $180,000 you paid in, while the death benefit has grown to about $248,214 and the cash value is still compounding.
Why the dividend-on-collateral toggle changes everything
When you borrow from a mutual insurer, most carriers continue crediting dividends on the full cash value — including the portion pledged as collateral — while charging interest on the loan. That is the mechanic infinite banking advocates point to: your money keeps working while you use it. Some carriers instead reduce the dividend base to the unencumbered value, and a few use a variable loan rate tied to Moody’s corporate bond index. Flip the toggle to “dividends stop on the borrowed portion” and the tool subtracts the growth you would have earned on the collateral from the policy route’s total cost. On the default scenario that foregone growth is real money, and it can erase the entire advantage over a bank loan. Read your policy’s loan provision before you assume the favorable version.
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Your banking capacity over time
The table below rebuilds itself from the sliders above. The pattern to watch is the gap between cumulative premiums and loan capacity: in the early years the policy is behind, because acquisition costs come out of the first premium, and after roughly year four to six the capacity line crosses above the premium line. That crossing year is the true start of the banking system.
| Policy year | Cumulative premiums | Cash value | Loan capacity (LTV applied) | Death benefit |
|---|---|---|---|---|
| Year 5 | $90,000 | $94,180 | $84,762 | $180,000 |
| Year 10 | $180,000 | $215,838 | $194,254 | $248,214 |
| Year 15 | $180,000 | $268,973 | $242,076 | $309,319 |
| Year 20 | $180,000 | $335,190 | $301,671 | $385,468 |
Two features of that schedule matter more than the totals. First, the premium line goes flat after funding ends while the capacity line keeps rising — that is the compounding engine doing the work, and it is why a ten-pay policy keeps widening its own capacity for decades. Second, the death benefit is computed as the greater of a base face amount equal to about ten times your annual premium or 115 percent of cash value, which approximates the corridor a heavily overfunded policy must maintain. Your carrier’s illustration will show a different, contract-specific corridor.
Infinite banking versus borrowing from a bank
A policy loan is not free money. You pay interest, and the interest is not deductible unless the loan is used for a business purpose. What makes the comparison interesting is that a policy loan is usually priced below unsecured consumer credit and has no underwriting, no credit check, and no fixed repayment schedule — you can pay interest only, and the loan simply reduces the death benefit if it is still outstanding at death.
| Borrowing route | Typical 2026 rate | Underwriting | Repayment terms | Collateral |
|---|---|---|---|---|
| Whole life policy loan (fixed) | 5.0% – 6.5% | None | Flexible, interest-only allowed | Policy cash value |
| Policy loan (variable, bond-indexed) | 4.5% – 7.0% | None | Flexible, floats with index | Policy cash value |
| Home equity line of credit | 7.5% – 9.5% | Credit and income review | Interest-only draw period | Home equity |
| Personal bank loan | 9.0% – 14.0% | Credit check, income proof | Fixed 2 to 7 years | Unsecured |
| Business line of credit | 9.0% – 13.0% | Financials, personal guarantee | Annual renewal | Business assets |
| Credit card | 18.0% – 27.0% | Credit check | Revolving minimums | Unsecured |
Run the defaults through the tool and the comparison is concrete: a $100,000 loan for seven years costs $38,500 in policy loan interest at 5.5 percent, against $66,500 at a 9.5 percent bank rate. The spread — $28,000 — is the value of the banking arrangement before considering that the cash value keeps compounding on the borrowed collateral at carriers that credit dividends on it. Change the policy loan rate to 7 percent and the bank rate to 8 percent and the advantage nearly vanishes, which is exactly why the calculator asks for both rates instead of assuming one.
Infinite banking explained in five minutes
Before you tune the sliders, it helps to hear the mechanic described end to end. The video below walks through how a dividend-paying whole life policy is used as a personal bank — premium funding, cash value, policy loans, and the death benefit that stays in place throughout. Watch it with one question in mind: does the loan provision in the policy you are considering credit dividends on the collateral, or only on the unencumbered cash value?
The five mechanics that make or break a banking policy
Infinite banking is not a product you buy; it is a set of contract terms you either get right or do not. These five decide whether the system works as designed.
| Mechanic | Why it decides the outcome | What to verify in the contract |
|---|---|---|
| Maximum cash value funding | A base whole life policy without paid-up additions loads commissions and puts little into cash value in years one through five | A guaranteed paid-up additions rider, base premium at or near the minimum face, PUA premium as large as the MEC limit allows |
| Dividends on borrowed collateral | Determines whether borrowing costs you growth or only interest | The loan provision: full cash value in the dividend base, or unencumbered only |
| Loan interest type | A fixed rate is predictable; a variable rate can float above a bank loan in a rising-rate cycle | Fixed or variable, and whether the variable is capped |
| Company dividend history | Illustrated growth is not guaranteed; only the guaranteed column is contractual | Dividend scale history through 2008 and 2020, and the guaranteed column of the illustration |
| Carrier financial strength | A mutual insurer must survive 40 years to deliver the long-run numbers | AM Best and S&P ratings, plus the company’s mutual or stock ownership structure |
Why funding beats product choice
A whole life policy funded at $2,400 a year does not become an infinite banking system, no matter which carrier writes it. The mechanic does not scale with policy count or branding; it scales with premium density. A policy needs enough paid-up additions premium flowing in each year that the cash value grows faster than the acquisition cost drags it down. That is why the calculator exposes the first-year cash value percentage as a slider: a policy that credits only 40 percent of the first premium takes years longer to cross its premium line than one crediting 85 percent.
The MEC ceiling is the real constraint
Funding harder is not always possible. The modified endowment contract rules cap how much premium can go into a policy relative to its death benefit. Cross that line and the policy becomes a MEC: withdrawals and loans are taxed last-in-first-out and hit with a 10 percent penalty before age 59 and a half. Infinite banking policies are typically designed to $1 or $2 below the seven-pay limit, which is why underfunded death benefits and aggressive premiums appear together in a well-built design.
How infinite banking compares with the alternatives
| Strategy | Liquidity | Tax treatment | Return profile | Best suited to |
|---|---|---|---|---|
| Infinite banking (whole life) | High after year 5 to 7, via policy loan | Cash value grows tax-deferred, loans are not taxable events while the policy lives | 4 to 6 percent, low volatility, guarantees in the contract | Business owners and savers who want a stable capital pool with a death benefit attached |
| Taxable brokerage account | Immediate | Dividends and capital gains taxed annually or at sale | Market-dependent, historically higher but volatile | Long-horizon growth with tolerance for drawdowns |
| Bank savings and CDs | Immediate | Interest taxed annually as ordinary income | Below inflation in most years | Emergency reserves under one year of expenses |
| HELOC | Immediate while the line is open | No tax on draws, interest may be deductible if used on the home | Rate risk; the line can be frozen or reduced | Homeowners with substantial equity and stable income |
| 401(k) loan | Fast but capped and repayment is mandatory | No tax if repaid on schedule | Opportunity cost of being out of the market | Short-term needs inside an employer plan |
The honest reading of that table is that infinite banking competes with cash and credit lines, not with equities. It buys certainty, liquidity, and a death benefit in exchange for a lower expected return and a long lock-up. Households that need the money in three years should not use it.
How to test whether infinite banking fits your household
- Confirm you have a funded emergency reserve first. Six to twelve months of expenses in cash should sit outside the policy. Cash value is not a substitute for a reserve, because the first several years carry surrender charges and surrender costs more than a policy loan in the early years.
- Ask for the guaranteed column, not the illustrated column. Every illustration shows a guaranteed column with a floor near zero. If the policy only makes sense on the non-guaranteed column, you are buying a projection, not a contract.
- Check the loan provision in writing. Ask the carrier directly whether dividends are credited on the full cash value when a loan is outstanding, and whether the loan rate is fixed or variable. Then set the calculator’s toggle to match the answer.
- Model the borrowing you actually expect. Borrowing $25,000 for a roof for three years is a very different calculation than borrowing $200,000 for a business for ten. Use both and see whether the policy route still wins.
- Compare against your real bank offers. Pull your own HELOC, auto loan, and business line quotes and enter those rates. The default bank rate in the tool is a national average placeholder, not your number.
- Project the death benefit at the year you expect to need it. A policy loan that is still outstanding at death reduces the death benefit dollar for dollar. If the plan is to borrow and never repay, that is a legitimate strategy only if the remaining death benefit still covers the need it was bought for.
Five mistakes that quietly disable the banking system
- Buying the policy for the loan and never funding it. A $100,000 policy with a $30,000 cash value cannot lend $80,000. Capacity is a function of cash value, and cash value is a function of premium density.
- Surrendering instead of borrowing. Surrender triggers tax on the gain and ends the death benefit. A policy loan keeps both alive. Confusing the two is the single most expensive error in this strategy.
- Ignoring the variable loan rate. A policy loan tied to a bond index can be cheap in a low-rate year and expensive in a high-rate year. Model the 7 percent case, not only the 4.5 percent case.
- Letting the loan roll without paying interest. Unpaid interest is added to the loan balance and can eventually consume the entire cash value and lapse the policy — which converts a tax-free loan into a taxable surrender event.
- Buying from an illustration rather than an illustration plus a contract. Ask for the loan provision, the dividend history, and the guaranteed schedule. If the agent cannot produce all three in writing, the projection is marketing.
Key takeaways
- Banking capacity equals cash value multiplied by the carrier’s loan-to-value — it is a contract term, not a guess.
- With $18,000 a year for ten years at 4.5 percent growth, cash value reaches roughly $215,838 and supports about $194,254 of loans.
- The cash value overtakes cumulative premiums around year four to six in an efficiently funded policy; before that, borrowing is expensive self-financing.
- At a 5.5 percent policy loan rate against a 9.5 percent bank rate, $100,000 for seven years saves about $28,000 in interest.
- If the carrier stops crediting dividends on the borrowed collateral, foregone growth can erase the entire advantage — always read the loan provision.
- A MEC conversion destroys the tax treatment of both loans and withdrawals; stay below the seven-pay limit by design.
Frequently asked questions about infinite banking
Is infinite banking legal?
Yes. Borrowing against the cash value of a life insurance policy you own is a standard contractual right that has existed as long as permanent insurance has. The IRS treats a policy loan as a loan rather than income as long as the policy remains in force. The strategy is aggressive in the sense that it requires high premiums and a long commitment, not in the sense that it exploits a loophole.
How much does my cash value keep growing while I have a policy loan?
At most mutual carriers, dividends and interest continue to be credited on the full cash value, including the portion serving as collateral, while interest accrues on the loan. That is the mechanic the calculator’s “dividends continue on the collateral” setting models. Some carriers credit only the unencumbered portion, which removes the advantage — the toggle shows how much growth that costs.
How much money do I need to start infinite banking?
There is no legal minimum, but there is a practical one. Acquisition costs consume a large share of the first year’s premium, so policies funded below roughly $10,000 to $12,000 a year take substantially longer to reach usable capacity, and some carriers will not issue a paid-up additions rider at very low base premiums. Many practitioners start in the $12,000 to $25,000 a year range.
Can I lose my policy if I do not repay a policy loan?
Yes. A policy loan is secured by the cash value and the insurer can offset it, and it reduces the death benefit if it is outstanding when you die. If the loan balance plus accrued interest ever equals the cash value, the policy lapses. At that point any gain becomes taxable, which is the opposite of the tax-free access the strategy is designed to produce.
Is infinite banking a scam?
The mechanic is real. The overpromising around it is the problem. Claims that a policy delivers tax-free compounding with no cost ignore the acquisition cost, the loan interest, and the opportunity cost of money locked in a low-volatility asset. Run your own numbers through this calculator with your own carrier’s loan rate; if the policy route loses to your bank’s rate, the strategy is not for your situation at these premiums.
Is a variable loan rate better than a fixed loan rate?
A fixed rate gives you certainty and is easier to plan around. A variable rate tied to Moody’s corporate bond index has historically been cheap in low-rate periods and can exceed a fixed rate in a rising-rate environment. If your plan depends on borrowing repeatedly for decades, model the higher end of the variable range rather than the average.
What happens to the death benefit if I die with a loan outstanding?
The insurer subtracts the outstanding loan balance and any accrued interest from the death benefit and pays the remainder to the beneficiary, income tax free under IRC section 101(a). That net amount is still generally larger than the cash value would have been, which is why the loan is not a disaster — but it does mean the coverage protecting your family shrinks as the loan grows.
Who should not use infinite banking
Skip this strategy if any of the following is true: your emergency reserve is thin; you may need the money inside five years; you are not confident you can fund the premium through a recession; or your marginal tax bracket is low enough that the tax-free access is worth little. It is also a poor fit if you are choosing between funding a policy and capturing an employer 401(k) match, which is an immediate 50 to 100 percent return that no cash value schedule can match.
Infinite banking also fails as a replacement for term coverage during the years when your obligations are highest. A policy dense enough for banking is not dense enough for a large face amount at a low premium. Most households that use the strategy well carry level term for the mortgage and income-replacement need, and run the banking policy as a separate capital pool. See our whole life cash value calculator for a growth-only view of the same policy, our cash value growth calculator for the year-by-year schedule, and our policy loan guide for how the borrowing mechanics work in practice.
Related resources
- How to use the infinite banking calculator: 2026 walkthrough
- Infinite banking explained: how the concept works in 2026
- Infinite banking with whole life insurance: complete guide
- Bank on yourself life insurance: becoming your own bank
- Life insurance policy loans: how borrowing against cash value works
- IRS Publication 525: taxable and nontaxable income (policy loan and death benefit treatment)
- AM Best: insurer financial strength ratings
- Insurance Information Institute: life insurance facts and statistics
- NAIC consumer resources: policyholder rights and carrier regulation
Assumptions and limits
This calculator is an educational model, not an illustration and not financial advice. It assumes level premiums, a constant growth rate, a constant loan rate, and a loan-to-value that does not change over time. Real policies credit dividends annually at a rate set by the insurer’s board, carry surrender charges in the early years, and vary the loan provision by state and contract. The death benefit approximation uses ten times annual premium as a base face amount plus paid-up additions, which is representative of an overfunded design but will not match your carrier’s illustration. Verify every figure against the policy you are actually considering, and ask the carrier for the loan provision, the guaranteed column, and the dividend history before you commit.
