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IBC 201: How to Maximize Your IBC Policy

Do you already have your first IBC policy, and want to take it to the next level? Maybe you’re a few years in and you’ve seen and experienced the power of storing cash in a policy. You’re earning interest and dividends, have exceptional compounding power and guaranteed access to use your money, and you’re watching the death benefit increase.

Now you want to store more cash. Is it time to start another policy? Should you insure yourself, your spouse, kids, grandkids? Why? How does it work when you start building a system of policies?

We’re starting a series for those who are already IBC owners and wanting to take their policy to the next level. 

Today, we’re digging into how to amplify your Infinite Banking Policy. Next, we’ll talk about insuring other family members, like spouses, kids, and grandkids. Then, we’ll talk about managing multiple policies.

So if you want to hear about what to do after your whole life insurance policy is already working to continue to grow and accelerate its potency… tune in now!

Ways to Maximize Your IBC Policy

A common misconception of Infinite Banking is that when you pay back a policy loan, you’re paying yourself interest. This isn’t exactly true, however. When you pay back a policy loan, any interest you pay is to the insurance company. What Nelson Nash talks about in his book is making payments beyond the interest, which can help make your policy more efficient. 

The most efficient way to maximize your policy has a lot to do with your Paid-Up Additions. The PUA rider allows you to make extra premium payments in the early years of your policy so that your policy grows faster. If you’re maximizing your PUAs, you’re supercharging the savings component of your policy.

In the early stages of your policy, it’s crucial to maximize your PUAs for as many years as you’re able. That’s because, in the early years, you have more certainty. So you’re creating more room for the future when you may not be able to maximize those PUAs. 

Catch Up On Any Missed PUAs

If you’re in a position where you were unable to maximize your PUAs one year, you have some time to catch up on those payments. Different companies offer different time limits for how far back you can “catch up.” So if you didn’t fund your policy as much as you could have, you have more room to pay those PUAs. Catching up will allow you to maximize your policy after lean years. 

It’s also important to note that the catch-up provision has some limitations. For example, the amount of premium you’re allowed to catch up each year is based on the average of what you’ve contributed the previous 7 years. This ensures that the insurance company stays viable—which is good for you and all policyholders. 

Take and Repay Policy Loans

Another way to maximize your IBC policy is to be a good steward of your policy loans. If you’re a few years into your life insurance policy, there’s a good chance you’ve utilized your loan provision. Maybe you’re even using it to create cash flow. That’s a great sign that you’re on the right track. 

The next step in maximizing the effects of your policy is to pay back those loans. Your loan payments may not be scheduled, yet paying back your loans frees up more of your cash value to be used again. This is the true power of an IBC policy. 

In a way, it’s like a line of credit, where you pay down your balance to free up money for new opportunities. And have no liquidity fears—the second your payment clears, that same amount of capital is free for you to use again.

When Should You Add Another Life Insurance Policy?

We’ve heard the following question several times: If I design a policy for $50,000 this year, what happens if next year I come into a large sum of money? 

The first questions we ask in response are:

  • Is this a one time sum?
  • Will this be a consistent stream of income that you foresee continuing? 
  • Or are there additional places in your personal economy that you could pull cash from?

While there are limitations to what you can pay in PUAs, those limitations do not outweigh the benefits of insurance. If you want to funnel a one-time windfall into an existing policy, your policy can become a MEC, and lose tax advantages. Nor is it helpful to open a new policy based on income that is not recurring. 

What is Human Life Value?

While for some, insurance may be a “one-time” thing, it doesn’t have to be. You’re able to buy life insurance on yourself all the way up to your Human Life Value. Insurance companies identify HLV as a calculation of your net future earning potential. This means that as your income increases, so does your HLV. Even if your income has not increased since your first policy, there is a chance you’re not insured up to this amount. 

If your full HLV isn’t covered by your first insurance policy, you’re entitled to additional coverage. In theory, you can have as many policies as it takes to cover this amount (but no more). In other words, don’t worry if your insurance needs to change.

Term, Whole Life, and HLV

We believe in the benefits of insuring up to your Human Life Value, because the calculation is designed to cover the income you would have earned if alive. This means that family members who benefit from that income will continue to benefit. 

However, it’s not always possible to insure this full amount solely with IBC policies. It depends on how much of your income you can put towards the premium. This doesn’t mean that you can’t have that insurance, it simply means you have to diversify. A combination of term insurance and whole life insurance can be a cost-effective way to reach HLV. 

There’s even term insurance that can convert to whole life insurance while protecting your insurability. This means if you can’t afford additional coverage now, you can buy term until you can afford to convert, without providing new proof of insurability. 

The Power of Dividends in IBC

Part of what makes cash value life insurance so powerful is the dividend component. While dividends are not guaranteed, they are highly reliable. They have a history of being paid for over a century, through every major war, recession, and health crisis. 

Dividends are paid on your cash value, which is why the PUA rider is so attractive. Because the more premium you can pay in the early years, the greater your cash value. And the greater your cash value, the greater your dividend. And we all know the “magic” of compounding interest. So if you’re looking to maximize your IBC policy, maximizing your PUAs is a good way to go. 

In later years of your policy, you can use your dividends to buy additional PUA. These PUAs then earn dividends as well, making your IBC policy a highly efficient machine. 

And while cash value may be most important to you now, it’s still important to remember to balance this with your death benefit. Your death benefit is what you leave to your loved ones, and can help you build generational wealth with the right structure. This is why it’s important to consider your HLV in your insurance strategy. 

IBC Best Practices for Family Banking

In part two of this conversation, we’re going to be looking at how to setup a family banking strategy, and why you would want to. We’ll look at the benefits of insuring multiple people in your life, as well as additional policies on yourself. You’ll learn how to think about your IBC strategy on a generational level so that your death benefit can be a part of your legacy.

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help!  

Book an Introductory Call with our team today, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster.

That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth  … plus boosts your investment returns, and guarantees a legacy, go to to learn more.

Rachel Marshall

Rachel Marshall is the Co-Founder and Chief Financial Educator of The Money Advantage and President of Marshall's Insurance and Financial Services. She is known for making money simple, fun, and doable. Rachel has built a team of licensed professionals (investment advisors, insurance agents, attorneys, tax strategists) to help her clients create time and money freedom with cash flow strategies, Privatized Banking, and alternative investments. Rachel is the co-host of The Money Advantage podcast, the popular business and personal finance show. She teaches how to keep more of the money you make, protect it, and turn it into cash-flowing assets.
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