Policy Loans: How the Money Actually Moves

Policy loans are one of the most misunderstood parts of the Infinite Banking Concept. So, how does the money actually move?

When you take a policy loan, you are not withdrawing your cash value. The insurance company lends you money from its general account, using your policy’s cash value as collateral. Your cash value remains in the policy and continues according to the policy’s terms. Depending on the insurer and policy design, an outstanding loan may affect the dividends credited to the policy, and dividends are not guaranteed.

The loan accrues interest at a rate determined by the insurance company, and you can generally choose when and how to repay it, subject to the policy and insurer’s terms. Unpaid loan balances and accrued interest can reduce the policy’s cash value and death benefit. If the loan balance becomes too large relative to the policy’s values, the policy could lapse, potentially creating tax consequences.

Understanding these mechanics is important because Infinite Banking isn’t simply about accessing cash value. It’s about understanding how a policy loan works, using borrowed capital intentionally, and having a plan to replenish that capital over time.

When you understand where the money actually goes, a policy loan becomes more than a financial transaction—it becomes a tool you can evaluate, manage, and use intentionally.

Want to Understand It Better?