How to Be Your Own Bank Without Life Insurance

What Does “Being Your Own Banker” Really Mean?

Being your own banker is about creating a personal financial system where you control the flow, timing, and repayment of credit so that you profit from the banking process.

One theory of how banks make money is, “Banks lend out a depositor’s money.” By paying the depositors a lower interest rate than what they are charging on loans, banks make a profit on the spread, and maintain control of the entire financial system.

When you take control of your own finances, and become your own banker, you change this equation. Instead of merely being a depositor and borrower, you position yourself to collect the profit a bank would collect.

Common Misconceptions About Personal Banking

Misconception #1: “You need life insurance to do it”
You can “Be your Own Banker” without any life insurance at all. All you need is some money and knowledge and you can get started. 

Misconception #2: “It’s only for wealthy people”
The process of “becoming your own banker” can be practiced to scale meaning it works at any income level. The key is knowledge and the ability to be consistent.  How much money you have is a factor that can determine the size of your personal banking system.

Misconception #3: “It’s too complicated”
The concept is simple: 1. Keep your money where you have control over it and the flexibility to access it without giving up compound growth. 2. Leverage your money to finance your purchases instead of using commercial banks or traditional financing.

Misconception #4: “You’ll make less money”
This would not be an accurate blanket statement. Profitability will be determined primarily by the decisions one makes when they are being their own banker. If good decisions are made then “becoming your own banker” will make everything you do financially better.

Why Wouldn’t Someone Use Life Insurance?

Participating whole life insurance-based banking strategies are extremely effective, but it’s not necessary to use whole life insurance to be your own banker.

Reasons People Don’t Use Life Insurance to Become Their Own Banker

Health Issues: If someone has pre-existing health conditions, life insurance premiums can be prohibitively expensive or a person may not qualify at all. In this scenario someone can often buy a policy on someone else in whom they have an insurable interest. If they have no family or business partners though, they may not be able to use life Insurance in conjunction with their personal banking system.

Cash Flow Constraints: Some people are lousy at saving money. They just won’t do it. Someone who won’t save money is usually someone who won’t make the required premium payments to obtain a good whole life policy for becoming their own banker. If we’re being honest, this type of person won’t be good at being their own banker anyway. If someone doesn’t have the will and the discipline to keep a portion of the money they’re making, that’s a bigger problem and it should be fixed immediately. We have helped a few people develop a habit of saving over the years, but out of the number of people we have attempted to help develop a savings habit it is disappointing how few of them actually follow through.

Cost Concerns: When buying whole life insurance to use in conjunction with a personal banking system, there is a cost associated with the life insurance portion of the policy. Some people who say they don’t want death benefit have a hard time justifying the cost of insurance in the early years of a whole life policy even if it is designed for “Becoming your own banker”. In a whole life policy designed for use in conjunction with a personal banking system the cost of insurance will usually disappear around year 12-15 which is incredible. Still, the initial outlay keeps some people from ever starting a good policy.

The “What If” Scenario

What if you could achieve similar benefits—control, tax advantages, guaranteed access to funds, and steady growth—without life insurance?

That’s a fair question, let’s pretend, for argument’s sake, that it was possible. Even if you get all of the things listed above, where would you get your guaranteed, tax-free death benefit?

Other Financial Products For Becoming Your Own Banker

You can use high-yield savings accounts, IRAs, CDs, and real estate as capital warehouses for becoming your own banker but none of these supply all of the multi-dimensional benefits of using a properly structured whole life insurance policy.

Here’s why:

Guaranteed Growth + Liquidity

Most alternatives involve trade-offs between growth and liquidity. Savings accounts offer liquidity, but minimal growth. Investment accounts offer growth but higher interest margin loans and limited access which creates a liquidity problem. Real Estate can offer growth but liquidity is not guaranteed.  Participating whole life insurance policies offer guaranteed growth and the ability to borrow against the value of the policy at any time—which makes it king of the hill when it comes to guaranteed growth AND liquidity.

Penalties, Fees, Use Limits and Approvals

Borrowing from your IRA can trigger fees, penalties and taxes and there are limits on how those funds can be used and rules on how they must be repaid. Even HELOCs depend on bank approval and credit score fluctuations. With participating whole life insurance, you borrow against your own policy no questions asked. It’s private, and there are no loan applications and there are no credit checks because a policy loan is fully collateralized.

Protection from Creditors and Lawsuits

Life insurance policies come with built-in creditor and judgment protection in most states. This means your policy cash values are shielded from lawsuits and creditors, making it a more secure financial foundation than other financial options.

Tax Free Legacy (Death Benefit)

The premiums you pay for a participating whole life policy build not only available cash value for you to use in your own banking system, they also buy a permanent death benefit for you to assign to a beneficiary—the death benefit of the policy will transfer wealth to your posterity tax-free. 

Take Control of Your Financial Future

Becoming your own banker is about taking control of your finances and creating a future with financial freedom. It takes consistency and responsibility to become your own banker, but as the adage goes, “With freedom comes responsibility”.

If you choose to become your own banker please contact us with any questions you have and to get the Whole Life insurance policies you will want for your personal banking system. We have been helping people establish policies for their own banking systems for 19 years. It’s what we do and we love it. Contact us by email: [email protected] or by phone: 317-912-1000.

Tomas P. McFie DC PhD

Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.