Cash Flow Banking Life Insurance

Cash flow banking isn't life insurance. People use cash flow banking as a financial strategy to borrow or withdraw money from an accumulated cash value within their permanent life insurance. The average interest rate for life insurance loans is about five percent. However, it varies for each company. Shop around and compare companies to secure life insurance with a cash flow banking plan.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Aug 25, 2021

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The Rundown

  • Cash flow banking isn’t life insurance
  • Another name for cash flow banking is infinite banking
  • Life insurance companies can keep your accumulated cash value after you pass away

Were you looking for cash flow banking life insurance? Cash flow banking goes by other names, but it’s not exactly life insurance.

So what is cash flow in life insurance? Don’t worry — we’re here to answer all of the frequently asked question regarding cash flow banking.

Read through this guide to learn how life insurance with cash flow banking works and how it affects life insurance rates.

After reading about cash flow banking life insurance, enter your ZIP code in the free comparison tool above to compare multiple insurance companies near you.

What is cash flow banking?

Cash flow banking isn’t life insurance. When you use the accumulated cash value from your permanent life insurance policy, it’s called cash flow banking.

Another term for cash flow banking is infinite banking.

As a policyholder, you can borrow money from your accumulated cash value and pay it back to the life insurance company.

Life insurance companies with cash flow banking opportunities usually provide permanent life insurance policies and annuities.

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How does cash flow banking work?

Let’s break down how cash flow banking (infinite banking) works.

If you have a whole life insurance policy, your monthly payments go toward life insurance and an accumulated cash value.

You won’t be able to use your accumulated cash value right away. When your accumulated cash value is ready for use, you can borrow money from the life insurance account.

Life insurance loans have an average interest rate between five and nine percent.

Since it’s a loan, you’ll pay back the money and any interest attached to it. Any loans that you don’t pay back will be deducted from the policy’s death benefits after you’ve passed away.

It’s recommended that you take out small loans so you can pay back the loan within a short time.

Can I withdraw money from an accumulated cash value?

The short answer is yes.

If you don’t want a loan, you can withdraw money from the accumulated cash value. However, you can only withdraw what you’ve put into the account.

For example, you have an indexed life insurance policy with a cash value of $13,000. But, you only contributed $6,000 in monthly payments.

That means you can withdraw up to $6,000 from the accumulated cash value.

If you decide to take out all of your money, you may not receive the entire amount. That’s because fees lower the accumulated cash value.

The surrender cash value is the lump sum amount you receive after fees and other charges from your life insurance company.

Each company has different percentages and fees, so it’s challenging to pinpoint an average.

How do life insurance rates with cash flow banking work?

If you decide to get a loan from your life insurance account, expect your life insurance rates to become more expensive.

Life insurance quotes with cash flow banking don’t exist. You haven’t put enough into the accumulated cash value at the start of your policy, so you won’t be able to use it yet.

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Which life insurance policies have cash flow banking opportunities?

Most permanent life insurance policies have a life insurance portion and an accumulated cash account. When you pay your monthly payments, you’re contributing to both of them.

Here’s a list of life insurance policies with these capabilities.

  • Whole life
  • Universal life
  • Variable life
  • Indexed universal life
  • Variable universal life

Whole life insurance is the simplest policy. Meanwhile, universal, variable, and index-related life insurance policies have investment and wealth opportunities.

Is cash flow banking safe?

The idea of infinite banking sounds like a scam, but it’s not. The cash flow banking system is more about financial strategy.

It’s a safe process, but you have to manage it carefully. If you don’t want your loans to affect your death benefits, you’ll have to pay them off before you pass away.

Does cash flow banking affect my taxes?

According to the Internal Revenue Service (IRS), any death benefits you receive from a life insurance company aren’t included in gross income.

That means you don’t have to report the money on your taxes. Report all interest payments and compensation to the IRS.

In addition to interest payments, you may have to include cash flow banking loans and withdrawals. It depends on the income type.

To be safe, ask your life insurance company how to file loans and withdrawals on your taxes. If you get a tax form, you’ll need to file them on your taxes.

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Why should I use cash flow banking?

The accumulated cash value you have with your life insurance company is your money. It’s almost like a retirement account that builds wealth over time.

Also, your accumulated cash value may not go to your beneficiaries.

If you don’t have a rider that sends the accumulated cash value along with your death benefits, the life insurance company will absorb the accumulated cash value you’ve built over time.

In other words, all the accumulated money you’ve paid to the life insurance company is taken instead of going to your beneficiaries.

You can change that. Contact your life insurance company and make arrangements for your surrender cash value to go to your beneficiaries.

Is cash flow banking an old system?

Cash flow banking has been around for a while. The idea of infinite banking is as old as the Civil War.

Walt Disney and Ray Kroc, two very successful individuals, used their whole life insurance policies to start massive businesses that are still around today.

What are the advantages and disadvantages of cash flow banking?

Before you buy life insurance with cash flow banking, let’s explore the pros and cons of this financial technique.


  • You borrow money from your accumulated cash value without affecting your credit
  • Lower interest rates
  • Options to withdraw from the surrender cash value
  • Investment opportunities with the right policy


  • Cash flow banking can affect your death benefits if you don’t pay the money back
  • The IRS may tax you for cash flow banking withdrawals
  • Your life insurance rates increase 
  • Cash values are tied to the company’s investment strategies

With pros and cons in a balance, you may ask yourself if cash banking is right for you. It depends on how much you can afford.

Many factors determine whether affordable life insurance with cash flow banking is available to you. If it’s too expensive, find other ways to invest your money.

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Cash Flow Banking Life Insurance: What’s the bottom line?

The best insurance companies carry term life insurance and permanent life insurance policies. However, they may not promote cash flow banking.

It’s important to examine all details of your permanent life insurance policy. There are risks to infinite banking. We recommended taking out small loans from accumulated cash values.

Also, you should only withdraw your money when you have a better investment option.

Now that you know more about cash flow banking life insurance, use our free online quote tool to shop and compare rates from multiple companies in your area.

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