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The Infinite Banking Concept, largely attributed to Nelson Nash, revolves around the idea of becoming your own banker by utilizing a specially designed whole life insurance policy. Instead of relying on traditional banks for borrowing and lending, you capitalize your life insurance policy and then borrow against its cash value to finance purchases and investments. The goal is to recapture the interest you would typically pay to banks and keep your money working for you within your own "banking system."

When you borrow against the cash value of your whole life insurance policy, you are not actually withdrawing from your cash value. Instead, the insurance company lends you money using your cash value as collateral. This is a crucial distinction because your cash value continues to grow (and earn dividends, even on the borrowed amount) as if it were untouched. When you repay the loan, the money flows back into your policy, allowing you to recycle and reuse the same capital for various financial needs.

The death benefit of a whole life insurance policy is generally income tax-free to the beneficiary. Additionally, the cash value grows tax-deferred, meaning you don't pay taxes on the accumulated growth until you access it. When structured correctly, accessing the cash value through policy loans is also generally income tax-free, providing a significant advantage over taxable investment accounts or traditional loans. Furthermore, the money inside the life insurance policy can potentially come out income tax-free in retirement.

Traditional banking involves depositing money at a low interest rate and borrowing at a higher rate, with the bank profiting from the spread. Investing in the market carries the risk of volatility and potential losses. The Infinite Banking Concept aims to cut out the "middleman" (the bank) and allows you to control both the "depositing" and "borrowing" functions within your own policy. Unlike market investments, the cash value in a whole life policy grows predictably and is not subject to market fluctuations.