Maximizing Your Wealth with Infinite Banking: A Comprehensive Guide
If done properly Infinite Banking can be extremely lucrative, find out more!
14 minute read
Originally published: February 20, 2023

Maximizing Your Wealth with Infinite Banking: A Comprehensive Guide
If done properly Infinite Banking can be extremely lucrative, find out more!
13 minute read
Originally published: February 13, 2023

Welcome to our blog: Maximizing Your Wealth with Infinite Banking: A Comprehensive Guide. Infinite banking is a unique financial strategy that involves using a whole life insurance policy as a savings and investment tool, allowing individuals to access its cash value for their financial needs. With infinite banking, an individual can create a tax-free source of self-funded capital that can be used for several expenses or even investments. In this blog, we aim to provide a comprehensive overview of infinite banking in Canada. We will delve into how infinite banking works, its benefits, the process of setting up a policy, the risks and limitations, and alternatives available. This blog will provide you with all the information you need to make an informed decision about whether it’s the right choice for you.
In this article:
- Introduction to Infinite Banking in Canada
- What is Infinite Banking?
- What is Whole Life Insurance?
- How Infinite Banking Works in Canada
- The Pros of Infinite Banking in Canada
- The Cons of Infinite Banking in Canada
- How to Set Up an Infinite Banking Policy in Canada
- Risks and Limitations of Infinite Banking in Canada
- Alternatives to Infinite Banking in Canada
- Is Infinite Banking in Canada Legit or a Scam?
- Tax advantages of Infinite Banking in Canada
- Conclusion: Is Infinite Banking Right for You in Canada?
- Frequently Asked Questions (FAQs) about Infinite Banking
Introduction to Infinite Banking in Canada
Infinite banking is a financial strategy that has gained popularity in recent times, especially in Canada. The concept revolves around using a whole life insurance policy as a savings and investment tool, allowing individuals to access its cash value for their financial needs. Those who support infinite banking believe it provides an opportunity to establish a tax-free source of self-funded capital that can be used for various purposes such as funding big expenses, retirement savings, and leaving a legacy for loved ones.
In Canada, infinite banking operates by purchasing a whole life insurance policy and borrowing against its cash value. The policy’s cash value is then used to repay the loans and the interest charged. The benefit of this approach is that the interest rate paid is typically lower than what a bank would charge and the loan can be repaid tax-free. Furthermore, by borrowing from the policy’s cash value and repaying the loan, an individual can build a self-funded source of capital to cover expenses.
However, it’s crucial to understand that infinite banking is not a one-size-fits-all approach. The effectiveness of infinite banking as an investment strategy depends on various factors such as an individual’s financial standing and more.
What is Infinite Banking?

Infinite banking is a financial concept that involves using a whole life insurance policy as a savings and investment vehicle. Basically, by borrowing against the cash value of the policy and then repaying those loans, an individual can build a source of tax-free, self-funded capital that can be used for various purposes.
What is Whole Life Insurance?
Whole life insurance, unlike universal life insurance, does not give policyholders the freedom to choose where and how to invest their premiums. Instead, the investment decisions are made by the insurance company. There are two types of whole life insurance policies in terms of accruing interest: non-participating and participating.
In non-participating, or “non-par,” whole life insurance policies, the insurance company keeps any interest earned from the investments of the Cash Surrender Value (CSV). The premiums for non-participating policies are typically lower as they take into account these gains.
On the other hand, participating, or “par,” whole life insurance policies distribute the interest to the policyholders, minus a fee, as a policy dividend. If there is a loss in the investments in a given year, no dividend will be paid, but the policyholder’s CSV will not be affected. While participating policies have the potential to earn more, their premiums are higher to reflect this.
Read more on the different types of permanent life insurance here.
How Infinite Banking Works in Canada
Infinite banking in Canada works by purchasing a participating whole life insurance policy and using its cash value as a source of self-funded capital. The individual becomes both the policy owner and the insured, allowing them to borrow against the policy’s cash value whenever they need to. The borrowed amount is then repaid with interest, and the interest rate is usually lower than what a traditional bank would charge. The policy’s cash value continues to grow, providing the individual with a source of capital that they can access tax-free.
To get started with infinite banking, an individual would purchase a whole life insurance policy, which is a type of permanent life insurance. This policy builds up a cash value over time, which can be accessed through policy loans. The policyholder can then use the policy’s cash value to pay for expenses, such as big-ticket purchases, or to fund their retirement.
One of the key benefits of infinite banking in Canada is that it allows individuals to take control of their financial future. By using a life insurance policy as a savings and investment tool, individuals can access their own capital whenever they need it, without having to go through a traditional lending institution. Additionally, the interest charged on loans from a whole life insurance policy is typically lower than what a traditional bank would charge, and the loans can be repaid tax-free.
The Pros of Infinite Banking in Canada
Infinite banking in Canada offers a number of pros to those who choose to use this financial strategy.

Here are some of the key advantages:
Access to self-funded capital: Infinite banking allows individuals to access their own capital whenever they need it, without having to go through a traditional lending institution. This provides individuals with a source of self-funded capital that they can use for a variety of purposes, such as funding major expenses, saving for retirement, or leaving a legacy for loved ones.
Lower interest rates: The interest charged on loans from a whole life insurance policy is typically lower than what a traditional bank would charge. This can be particularly beneficial for individuals who need to access large amounts of capital and want to keep their interest costs to a minimum.
Tax-free loans: Policy loans are tax-free, which means that individuals can access their capital without having to pay taxes on the loan amount or the interest charged. This can be particularly beneficial for those who want to minimize their tax burden.
Cash value growth: The cash value of a whole life insurance policy continues to grow over time, providing individuals with a source of capital that can be accessed tax-free. This growth is based on the policy’s underlying investments, which can include stocks, bonds, and other assets.
Estate planning: A whole life insurance policy can also be used as an estate planning tool, providing individuals with a way to leave a legacy for their loved ones. The death benefit of a whole life insurance policy can be used to pay off debts, provide for surviving family members, or fund a charity.
Flexibility: Infinite banking offers individuals a great deal of flexibility, allowing them to access their capital whenever they need it and to use it for a variety of purposes. This flexibility can be particularly beneficial for those who want to be in control of their financial future.
Although there are great benefits for infinite banking, there are some things that you should consider before getting into infinite banking. There are also some cons to infinite banking and it might not be suitable for someone who is looking for affordable term life insurance, or if someone is looking into purchasing life insurance solely to protect their family in the event of their death.
The Cons of Infinite Banking in Canada
Infinite banking is not without its potential cons and drawbacks. It’s important to understand both the benefits and limitations of this financial strategy before deciding if it’s right for you.
Here are some of the potential cons of infinite banking:
Complexity: Infinite banking can be complex, and it’s important to understand the details of how a whole life insurance policy works and how policy loans are structured. Additionally, many individuals may not be familiar with life insurance as an investment tool, which can make it more challenging to understand how to use infinite banking effectively.
High costs: Whole life insurance policies can be more expensive than other forms of life insurance, and the costs associated with infinite banking can add up over time. Additionally, policy loans can have interest rates that are higher than what is offered by traditional banks, which can make it more expensive to access your own capital.
Limited investment options: Infinite banking requires the purchase of a whole life insurance policy, which limits the investment options available to individuals. Unlike traditional investment portfolios, which can include a variety of assets, a whole life insurance policy is limited to the investment options offered by the insurance company.
No guarantees: Infinite banking is not a guaranteed investment, and the growth of the policy’s cash value will depend on the underlying investments. Additionally, policy loans are subject to interest rate changes and the overall financial health of the insurance company.
Reduced death benefit: Policy loans can reduce the death benefit of a whole life insurance policy, which is the amount paid out to the policy’s beneficiaries upon the policyholder’s death. This can be particularly problematic for individuals who rely on the death benefit to provide for their loved ones.
Overall, infinite banking can be a useful financial strategy for those who understand the details of how it works and are willing to accept the costs and limitations associated with this investment. It’s important to carefully consider both the benefits and drawbacks of infinite banking and to contact our financial advisors or life insurance brokers before deciding if it’s right for you.
How to Set Up an Infinite Banking Policy in Canada
In order to reap the benefits of a whole life insurance policy, it’s important to consider a few key factors. Firstly, the policy should include both insurance and a cash accumulation component, allowing for borrowing against the cash value in the future. Secondly, a participating whole life insurance policy, which pays regular dividends, is a good choice as it helps to grow the cash value faster and potentially reduces premium costs.
By choosing a policy from a mutual insurance company, where policyholders become owners, it can be beneficial as you will have more control over your earnings. Finally, determining the appropriate coverage amount and understanding the premium cost is crucial. It requires an evaluation of your financial needs and the maximum amount you can contribute regularly.
Working with our life insurance brokers is beneficial as it will help you get a better knowledge of permanent life insurance but also of infinite banking. Our brokers can help you figure out a strong life insurance and infinite banking strategy.
Insurance Companies That Offer Infinite Banking
- Manulife
- Sun Life
- Foresters Financial
- Equitable life
There are other insurance companies that you can use for infinite banking but the best option is to contact a life insurance broker who can help you with both infinite banking and finding an appropriate life insurance plan for you.
Risks and Limitations of Infinite Banking in Canada
Here are some of the risks and limitations of infinite banking in Canada:
Market Risk: The value of the cash accumulation component of the policy is linked to financial markets, and therefore, it is subject to market volatility and fluctuations.
Interest Rate Risk: Changes in interest rates can impact the borrowing power of the policy and the value of the cash accumulation component.
Liquidity Risk: Borrowing against the cash value of the policy can reduce the amount of money available for emergencies or other purposes.
Insurance Risk: The policyholder must maintain premium payments to keep the insurance coverage in force. If premium payments are not made, the insurance coverage may lapse and the policyholder may lose their investment.
Surrender Charge: If the policyholder decides to cancel the policy early, they may be subject to a surrender charge. This charge can be substantial and reduce the amount of money available to the policyholder.
Taxation: The policyholder may incur tax consequences on the loans, dividends, and death benefit payments received from the policy. It is important to understand the tax implications of infinite banking before implementing it.
Complexity: Infinite banking can be complex, and it is important to understand the details of the policy and the cash accumulation component before making any investment decisions.
Limited Accessibility: Infinite banking may not be available in all provinces or territories in Canada. Additionally, certain insurance companies may have restrictions on who can participate in this type of program.
Alternatives to Infinite Banking in Canada
Each of these alternatives has its own benefits and limitations, and it is important to consider your financial goals and risk tolerance before making a decision. Our experienced financial advisors can help you understand the options available and determine which alternative is best for you.
There are several alternatives to infinite banking in Canada that individuals can consider, including:
High-Interest Savings Accounts: A high-interest savings account can offer a low-risk way to save and earn interest on your money.
Tax-Free Savings Accounts (TFSA): A TFSA is a tax-free savings vehicle that allows individuals to earn tax-free investment income.
Registered Retirement Savings Plans (RRSP): An RRSP is a tax-sheltered savings plan that can help individuals save for retirement.
Non-Registered Investment Accounts: A non-registered investment account allows individuals to invest their money in a variety of investment products, including stocks, bonds, and mutual funds.
Real Estate Investment Trusts (REITs): REITs allow individuals to invest in a portfolio of income-generating real estate assets.
Guaranteed Investment Certificates (GICs): A GIC is a low-risk investment that provides a guaranteed rate of return over a set period of time.
Bonds: Bonds are debt securities that provide a fixed rate of return over a set period of time.
Is Infinite Banking in Canada Legit or a Scam?
Infinite Banking in Canada is a legitimate financial strategy, not a scam. Infinite Banking is a concept that was developed by Nelson Nash in the United States, and it has since been adapted and implemented by financial professionals in Canada and other countries.
Infinite Banking is a strategy that involves using a specially designed whole life insurance policy to build and access cash value over time. This strategy can offer benefits such as increased financial flexibility and control, as well as potential tax advantages.
However, as with any financial strategy, there are potential risks and drawbacks that should be carefully considered before deciding whether Infinite Banking is the right strategy for your individual financial situation and goals. Additionally, there may be fees and costs associated with the implementation of an Infinite Banking strategy.
Our life insurance brokers and our financial planners can help you fully understand the benefits and potential risks of implementing an Infinite Banking strategy, as well as help you choose the right insurance policy and structure for your individual needs.
Tax advantages of Infinite Banking in Canada
Infinite Banking in Canada utilizes a specific type of permanent life insurance policy, known as a participating whole life policy, as the funding vehicle for the strategy. Participating whole life policies provide both life insurance coverage and a cash value component that grows over time. The cash value component of the policy can be accessed through policy loans or withdrawals and can potentially provide tax advantages.
One of the key tax advantages of Infinite Banking in Canada is the potential to grow the cash value of the policy tax-free. Unlike other investment vehicles, such as mutual funds or stocks, the growth of the cash value component within a participating whole life policy is not subject to income tax. Additionally, the policyholder may be able to access the cash value of the policy tax-free, as long as the withdrawals or policy loans do not exceed the policy’s adjusted cost basis.
The adjusted cost basis of a participating whole life policy represents the amount of premiums paid into the policy, less any dividends or policy fees. Policy loans or withdrawals that do not exceed the adjusted cost basis of the policy are considered to be tax-free. However, if policy loans or withdrawals exceed the adjusted cost basis, the excess amount may be subject to taxes.
It is important to note that the tax advantages of Infinite Banking may be subject to change based on changes to tax laws and regulations in Canada. Additionally, the structure and implementation of an Infinite Banking strategy can impact the tax implications.
Conclusion: Is Infinite Banking Right for You in Canada?
In conclusion, whether Infinite Banking is right for you in Canada ultimately depends on your financial goals, risk tolerance, and overall financial situation. While Infinite Banking can offer benefits such as increased flexibility and control over your money, as well as potential tax advantages, it may not be the best option for everyone. It is important to carefully consider the costs and potential returns of participating in an Infinite Banking program, as well as to thoroughly research and understand the associated risks. Ultimately, consulting with our financial professional can help you make an informed decision on whether Infinite Banking aligns with your individual financial needs and objectives.
Contact us now to learn more about Infinite Banking
Now that you have read our blog: Maximizing Your Wealth with Infinite Banking: A Comprehensive Guide, contact our team to see what your options are so that you can build your investments and you can protect your finances. At Protect Your Wealth, we’ve been providing expert advice for all types of life insurance, and retirement and investing planning, since 2007. As your Life Insurance broker and financial planner, we work with you to create a personalized plan for your family or business that covers and meets your needs.
To schedule a consultation about your investment goals, or if you have any questions about insurance in Ontario or Canada, please contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia and Alberta including areas such as Guelph, Edmonton, and Kelowna.
Frequently Asked Questions (FAQs) about Infinite Banking
Infinite Banking is a financial strategy that involves using a specially designed whole life insurance policy to build and access cash value over time.
Infinite Banking works by using a participating whole life insurance policy to build and access cash value. The policyholder pays premiums, which are invested by the insurance company and earn dividends. Over time, the cash value of the policy grows, and the policyholder can access it through policy loans or withdrawals.
Infinite Banking can offer benefits such as increased financial flexibility and control, as well as potential tax advantages.
The risks of Infinite Banking include the potential for policy loans to reduce the death benefit of the policy and the possibility that the policy may not perform as expected.
Infinite Banking may not be the best strategy for everyone. It is important to carefully consider the costs and potential returns of participating in an Infinite Banking program, as well as to thoroughly research and understand the associated risks.
To get started with Infinite Banking, it is important to work with a financial professional who can help you determine if Infinite Banking is the right strategy for your individual financial situation and goals.
Yes, you can access the cash value of the policy at any time through policy loans or withdrawals. However, policy loans may reduce the death benefit of the policy.
If you stop paying premiums, the policy may lapse, which means that you may lose coverage and access to the cash value of the policy.
Yes, there may be fees and costs associated with implementing an Infinite Banking strategy, such as insurance policy premiums and administration fees.
Infinite Banking is different from traditional banking in that it allows the policyholder to be their own source of financing, rather than relying on traditional banks or lenders. The policyholder can access the cash value of the policy and use it to finance purchases or investments, without having to go through a traditional lender.
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