How to Use the Infinite Banking Calculator (2026 Walkthrough)
The infinite banking calculator answers a question that no coverage calculator touches: if you fund a dividend-paying whole life policy as a personal bank, how much can it actually lend you, and what does that money cost compared with a bank? This walkthrough takes the tool apart input by input, shows a fully worked example at the default settings, and explains the four numbers you should change first if your situation does not match the assumptions.
What the calculator does
The tool builds your policy year by year from the values you enter, then reports four outputs that together describe the banking system:
- Banking capacity — cash value multiplied by the loan-to-value your carrier allows, at the year you choose to tap the policy.
- Premium recapture year — the first year cash value exceeds everything you have paid in.
- Policy loan cost versus bank cost — total interest on a policy loan compared with the same loan at a bank rate you supply.
- Growth preserved on the borrowed money — what the cash value earns while it is collateral, or the growth you give up when the carrier credits only the unencumbered portion.
Every number updates as you move a slider, so you can test a policy design before you buy it, or audit one you already own. Nothing is sent anywhere: the arithmetic runs in your browser.
How to use it in six steps
- Enter the annual premium you plan to fund. This is the total premium including the paid-up additions rider, not just the base policy premium. A banking policy is funded heavily on purpose.
- Set the funding period. Ten-year funding is the common design; a five-year funded policy reaches capacity faster but demands a much higher annual commitment.
- Set the first-year cash value percentage. Ask your carrier what share of the first-year premium lands in cash value. Well-built policies land between 75 and 90 percent; a base policy with no paid-up additions rider can be far lower.
- Choose the growth rate. Use the carrier’s current dividend scale, then run the tool again two points lower. The guaranteed column is the floor you can plan around.
- Set the loan-to-value and the policy loan rate from your contract, not from an article. Whether the loan rate is fixed or tied to a bond index changes the answer materially.
- Enter the borrowing you actually expect — amount, year, and how long you intend to keep the loan outstanding. Then read the badge.
Fastest path: open the infinite banking calculator and change only two things first — the policy loan rate and the “dividends on the borrowed collateral” toggle. Those two inputs decide the verdict more often than premium or growth rate.
A worked example at the default settings
The defaults describe a policy funded at $18,000 a year for ten years, with 80 percent of the first premium landing in cash value and a 4.5 percent growth rate. Lending is capped at 90 percent of cash value, the policy loan rate is 5.5 percent, and the comparison bank loan is priced at 9.5 percent for seven years.
| Result | Default value | What it means |
|---|---|---|
| Cash value at year 10 | $215,838 | $35,838 more than the $180,000 of premiums, before any borrowing |
| Banking capacity at year 10 | $194,254 | 107.9 percent of what was paid in — the policy has fully recaptured its premiums |
| Premium recapture year | Year 4 | Before year four, borrowing is expensive self-financing |
| Policy loan interest on $100,000 for 7 years | $38,500 | Simple interest at 5.5 percent |
| Bank interest on the same loan | $66,500 | Simple interest at 9.5 percent |
| Interest saved by banking on yourself | $28,000 | The spread, before any growth on the collateral is credited |
| Growth preserved on the borrowed $100,000 | $36,086 | Compounding continues on the borrowed collateral where the carrier credits dividends on it |
| Tax-equivalent growth | 5.92% | The taxable return needed to match 4.5 percent tax-deferred at a 24 percent bracket |
Read that table as a sequence rather than a scoreboard. The policy accumulates for a decade, crosses its premium line in year four, and by year ten can lend more than it took in. The borrowed money costs 5.5 percent while earning 4.5 percent inside the policy, which sounds like a losing trade until you compare it with the 9.5 percent the bank charges for unsecured credit. That spread, not the internal rate, is where the value sits.
The five result cards, explained
| Card | What it tells you | What to do with it |
|---|---|---|
| Cash value at that year | What the policy is worth on the books when you tap it | Compare it with cumulative premiums to judge whether the design is efficient |
| Growth preserved on the borrowed money | What the collateral keeps earning, or costs you when dividends stop on it | If the toggle is set to “no,” this card becomes the price of your carrier’s loan provision |
| Interest saved versus the bank | The dollar spread between the two routes over the loan term | Treat a negative number as a signal, not a rounding error |
| Premium recapture year | When cash value overtakes premiums paid | Do not borrow for consumption purposes before this year |
| Growth, tax-equivalent | The taxable return an ordinary account would need to match the policy | Use it to compare the policy against a brokerage account honestly |
The two progress bars compress the same information. The capacity bar pins at 100 percent when the policy can lend you everything you paid in. The cost bar shows the policy route as a share of the bank loan cost: 57.9 percent at the defaults, which is the visual version of the $28,000 spread.
Four inputs that change the answer most
Not every slider carries equal weight. These four move the verdict.
Policy loan rate
At 5.5 percent against a 9.5 percent bank rate the policy wins easily. Move the policy rate to 7 percent and the bank rate to 8 percent and the advantage narrows to a few thousand dollars over the same seven years. Above the bank rate, the tool turns the badge red and says so. That is the honest behavior you want from a model.
Dividends on the borrowed collateral
This single contract term can flip the answer. With dividends continuing on the full cash value, the policy route saves money at the defaults. Turn the toggle to “only on the unencumbered portion” and the $36,086 of foregone growth turns the $28,000 saving into an $8,086 shortfall. Ask the carrier for the loan provision in writing before assuming the favorable case.
First-year cash value percentage
A policy that credits 40 percent of the first premium in cash value pushes the recapture year from year four to year seven, because the acquisition cost has to be earned back before the compounding starts to matter. This is why funding density beats product branding in every infinite banking design.
Borrowing age of the policy
Tapping the policy at year five instead of year ten almost halves the capacity, because the cash value is still climbing toward and past the premium line. Move the “year you tap” slider across its range and watch the capacity bar: the practical lesson is that a banking policy is not liquid in the way a savings account is in the first several years.
Compare Free Life Insurance Quotes
Answer a few questions and see personalized rates from 50+ carriers in about two minutes. No obligation.
Secure form — your information is encrypted and never sold.
When the calculator tells you not to do it
A well-built tool should be willing to say no. This one says it in three situations:
- Your request exceeds capacity. The badge turns gold and the model uses the maximum the policy can secure. If you need more than the policy can lend, you need a different source of capital, not a bigger policy loan.
- The policy loan costs more than the bank. The badge turns red. At that point the strategy is a high-cost way to borrow from yourself, and the discipline it requires is not buying you anything.
- The two routes are within a few percent of each other. The badge reads “close to a wash.” Decide on flexibility, tax treatment, and the death benefit instead of interest, because the spread will not pay for the complexity.
There is also a case the calculator cannot flag: when the money you would pay in premiums belongs in an employer retirement plan with a match, or in an emergency reserve that does not exist yet. Fund those first. See our cash value calculator for a growth-only view of the same policy and our policy loan guide for the mechanics of borrowing, repaying, and what happens if a loan is outstanding at death.
Seeing the mechanic end to end
Numbers only go so far. The video below walks through the mechanics of premium funding, cash value, and policy loans in plain language, which makes the calculator easier to read afterwards.
Why the tool asks for your own contract values
Most calculators publish an average and multiply it by your inputs. That approach fails for infinite banking, because there is no meaningful industry average for the parts that matter. Loan-to-value, dividend-on-collateral treatment, and loan-rate structure are all contractual terms that differ by carrier, by product, and sometimes by state. A tool that borrowed a national average would produce a confident number that does not correspond to any policy you can actually buy.
So this calculator asks you to supply the four contract terms that drive the outcome and models everything else from first principles. The trade-off is a few extra minutes of homework: you need the carrier’s current dividend scale, the illustration’s first-year cash value, the loan provision, and the loan rate. That homework is the same analysis a good agent should walk you through, and doing it in a calculator means you can see what happens when the numbers disappoint rather than hearing only the favorable case.
Frequently asked questions
Is the infinite banking calculator free?
Yes. It runs entirely in your browser, requires no account, and saves nothing. Move the sliders as many times as you like; the results update instantly and nothing leaves your device.
How accurate is the cash value projection?
It is a constant-rate model: the growth rate you choose is applied every year without variation. A real policy credits dividends annually at a rate the insurer’s board sets, so actual results will diverge in both directions. Use the tool for comparison and design decisions, then confirm the numbers against the carrier’s illustration and its guaranteed column.
Should I use a fixed or variable policy loan rate in the calculator?
Model both. Enter the fixed rate to see the predictable case, then enter the high end of the variable range your carrier uses to see the stress case. If the strategy only works at the low end of a floating rate, the plan depends on interest rates you do not control.
Why does the capacity bar not reach 100 percent in the early years?
Because the policy has not recaptured its acquisition costs yet. In year one, cash value is a fraction of the premium paid, so capacity is a fraction of what you have put in. The bar approaches and then passes 100 percent as compounding outpaces the load, typically around year four to seven in an efficiently funded design.
Does the calculator account for taxes?
Only in the tax-equivalent growth card, which converts the policy’s tax-deferred rate into the taxable return an ordinary account would need to match it. Policy loans are not taxable events while the policy remains in force, which is why the loan comparison is made on interest cost rather than after-tax return. If the policy lapses with a loan outstanding, the tax treatment changes and the calculation no longer applies.
Key takeaways
- The calculator’s headline output is banking capacity, not the loan amount you asked for.
- At the defaults, $18,000 a year for ten years produces about $215,838 of cash value and $194,254 of borrowing capacity — 107.9 percent of premiums paid.
- Premium recapture happens in year four at those settings; borrowing before then is expensive self-financing.
- Two inputs drive the verdict: the policy loan rate and whether dividends continue on borrowed collateral.
- If dividends stop on the collateral, the default scenario flips from $28,000 saved to $8,086 more expensive than the bank.
- Run the guaranteed column as well as the illustrated one before you commit to a funding level.
Related resources
- Infinite Banking Calculator (2026): how much can your policy bank?
- Infinite banking explained: how the concept works in 2026
- Bank on yourself life insurance: becoming your own bank
- Whole life cash value calculator: growth without the loan model
- IRS Publication 525: how policy loans and death benefits are taxed
- Insurance Information Institute: life insurance facts and statistics
- AM Best: check the carrier’s financial strength rating
This walkthrough is educational and is not financial, tax, or legal advice. Policy provisions vary by carrier and state, and the model uses a constant growth rate that no insurer guarantees. Confirm every input against your own contract or illustration before making a decision, and treat any projection that depends on one favorable assumption as a question rather than an answer.
