The 9 Top IBC Lies – Busted by Hutch

The 9 Top IBC Lies

Infinite Banking promoters often embellish, exaggerate, or straight out lie about IBC to nab a quick Whole Life sale.

Whether it’s about the infinite banking concept itself, Whole Life product design, or loans, these IBC lies leave clients disappointed. This puts a stain on the entire strategy, which works if you work it correctly.

Hear Hutch hit these lies head-on while sharing some resources to learn the Banking Truths.


0:57 – IBC Lie 1 – Pay Yourself Back the Interest
1:55 – IBC Lie 2 – IBC Is Not About Positive Arbitrage
2:55 – IBC Lie 3 – IUL Doesn’t Work With IBC
3:55 – IBC Lie 4 – IBC Loans Are Debt & Any Debt is Bad
4:56 – IBC Lie 5 – Refinance All Your Loans Through IBC
5:57 – IBC Lie 6 – The Death Benefit Doesn’t Matter
6:59 – IBC Lie 7 – Quantity Over Quality: 10/90 Policies Are Best
7:56 – IBC Lie 8 – Your IBC Policy Must Be Non-Direct Recognition
9:49 – IBC Lie 9 – Laddering Policies Helps Maximize IBC Capacity

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A lot of people think that the infinite banking concept is too good to be true, and it’s probably because there are so many online promoters out there who are literally saying things that are too good to be true. That’s why I named my company I’m Hutch, and today we’re going to go over the top nine IBC lies. So we learned a long time ago that we didn’t need to embellish or exaggerate or straight out why, especially when we’re dealing with responsible and intelligent people because there’s a vacuum in their lives for what this does.

Not only now, but later as well, where people get in trouble is when they’re looking to replace irresponsible savings or spending patterns, with some kind of magic bullet, a magic unicorn product that’s just instantly amazing and awesome forever after, and there’s no downside risk. There’s no exposure. And not much responsibility is needed on your part. And it’s just simply not true.

Without further ado, let’s get into the top nine ABC lies so you can see what to look out for and see if this strategy is right for you.

IBC Lie #1: You’re paying yourself back interest into your banking life insurance policy.

The truth is you’re not. And that’s a good thing. Here’s why. With the 401k loan, you are borrowing from your 401k, and you are paying your account back all the interest.

This sounds like a good thing. Here’s why it’s not. To create the liquidity for the 401k loan, you have to sell investments. You have to cash them out possibly at the lowest point because that’s some of the best times to borrow.

And you do pay yourself back all the interest, but you’re the yield. It’s a single-use asset. And not so with life insurance. Your entire cash value balance keeps compounding even when you’re borrowing against it.

Because you’re borrowing against it. It’s like it never leaves the policy because it never leaves the policy. The life insurance company is willing to give you a loan because they’re holding your cash value as collateral, which means you can earn compounding twice on your cash value and whatever you borrow against it.


IBC Lie #2: Infinite banking is not about positive arbitrage.

Yes, it is. It is about arbitrage. I think the reason why certain online promoters are saying this is because there’s no immediate and instant one-dimensional arbitrage with whole life policies right now.

Consumers left totheir own devices only do what’s immediately right in front of them. But to do infinite banking right, it should include a network of assets in which case you can get immediate positive arbitrage. And they should be taking a long-term approach to not only just acquiring rate arbitrage between what the loan rate is and the growth rate is but also tax arbitrage. And if you’re a higher earner, this tax arbitrage, this tax immunity of the rate you’ll earn is arguably as important if not more, than rate arbitrage. And so sowing the seeds now, even if you don’t get immediate instant rate arbitrage will be worthwhile.

IBC Lie #3: IUL cannot work with infinite banking, and it’s just simply not true.

So, I’ve owned multiple index universal life policies for over ten years now. And what I can tell you is even though caps and floors have gone down, just like dividends have gone down, and even though you do give up a little more You take on a little more risk because you give up some guarantees that whole life offers. There are some unique benefits to IUL, uncapped S and P options with certain companies, which give you the opportunity for positive arbitrage, even if you’re with one of the cap options, as well as locked loan rates in the five to six percent range. So even though I do prefer whole life as the foundational piece and I had that before I got I well, I do like these benefits.

And I will say too that I did underfund some of the policies that’s brightest, shiniest objects that I thought were going to be great turned out not to be. What do you know? Whereas the solid companies kept their promises, The ones that I underfunded are still alive and kicking contrary to what you hear on the internet.

IBC Lie #4: IBC loans are debt. And debt is bad.

Now we agree that loads of consumer debt left unchecked is a recipe for financial disaster.

However, if you were simultaneously building up a safe and liquid asset that was tracking that liability, you could extinguish the debt at any moment. Are you really in debt at all? And if you could earn compound interest on an increasing balance while simultaneously paying simple interest on a flat or decreasing balance, We believe this is a recipe for financial success. Not to mention you’re earning compounding you wouldn’t otherwise be entitled to.

Because you would have spent the money and killed the compounding. Now I will say I’ve seen some other online promoters showing some very artistic math on whiteboards and smart boards to prove that there’s some magic bullet policy where you get this instantly and forever after, and it’s simply not true, but combined with a network of assets.

You can create this phenomenon in your life that can provide some wonderful long-term benefits.

IBC Lie #5: Refinancing all of your debt through your IBC policies.

We see two different versions of this, one with people with irresponsible spending habits, they have loads of consumer debt at high rates, and they think that buying this magic bullet policy first will help them better manage that situation, not true, not a good idea. You’re essentially financing the policy using those high rates it’s not gonna be able to keep up. What you should do is refinance using one of those bonafide debt services where they’ll cut up a bunch of your credit cards, and give you a good rate.

We can help you rent coverage, and get a convertible term policy where you can flip it to IBC whole life whenever you’re ready. Now for responsible savers, a lot of times they have access to really good rates, like they could buy a car at two point nine, but they think there’s some magic to borrowing against their policy five when in fact it’s really all about the optionality and having a network of assets and loan options so they can always choose the best one.

IBC Lie #6: I don’t care about the death benefit. I just want maximum cash value.

We hear this all the time. I understand it. If you do end a good enough job with the cash value, you won’t need as much death benefit in the future.

But the part you’re missing is with any whole life policy designed for infinite banking. The cash value has to equal the death benefit on a guaranteed base by age one twenty. I realize most of you won’t get there, but you get the lion’s share of it in your eighties during life expectancy.

Think of it this way though. If there is this reverse gravity, this magnetism pulling up the cash value towards the death benefit, do you really want less of it? Or more of it. Probably more of it. The other factor is the part that most people really like the overfunding or paid-up additions paid up additions are just miniature versions of the original vase policy. So the PUA ratios or the amount of death benefit to cash value matters so you can create this magnetism by pulling up the cash value on a guaranteed basis.

IBC Lie #7: The quantity of base policy to PUAs matters more than the quality of base premium and the PUAs.

This is simply not true. This has to do with something called 10/90 policies. We have a very detailed case study on them.

And what we found is that even though some whole life companies will allow you to pay only a ten percent base policy, which grows on its own, but slower than the ninety percent PUAs where somewhere between ninety to ninety-five percent of that goes straight to cash value. This sounds great on paper. But we found that the quality of the base and the PUAs, which are really just miniature versions of the base policy, aren’t growing as much as companies that only allow you to do say a 15/85 or a 20/80. And so it’s just like a restaurant.

The quantity of ingredients is important. But maybe not as important as the quality of those ingredients.

IBC Lie #8: You must use a nondirect recognition policy for infinite banking.

And here’s how you know it’s not true. The guy who wrote the original book, the late great Nelson Nash, every single example in his book is a direct recognition policy. So both of these things can’t be true. Right? Here’s another.

I use this example in my very detailed article where we go into the concept and the details of direct versus nondirect recognition. Too much for the scope of this video, But I talk about this story. Your agent is telling you two things both of which cannot be true.

One is he found this magic policy where you can just siphon immediate arbitrage from the company and all the policy holders immediately and forever. And by the way, number two is you’re part owner in this company, and it’s one of the greatest and most financially solvent companies in the world.

Both of these things can’t be true, right? Well, they’re not. So nondirect recognition just means there’s no effect on your dividend on low money. Sounds great on paper except when interest rates go up like they did in the nineteen eighties, and the loan rate is higher than the dividend rate, you don’t get any subsidy or any kind of bump on your dividend versus if this was direct recognition, you would.

Almost all of my policies are direct recognition just like Nelson Nash, the ones that he showed, and there’s a reason for that. It just so happens that in the low-interest rate environment, I could get better rates using outside turn-key lines of credit. And now that rates are going up, I can’t get those good rates at outside lines of credit, but when they raise my loan rate above the dividend rate, they actually pull my dividend up on loan money, not so with nondirect recognition. So definitely check out the article before you buy into this myth.

IBC Lie #9: Laddering policies are borrowing against one policy to fund another policy and borrowing against that policy to fund another policy is a good idea for IBC.

And it’s not. It’s actually counterintuitive to IBC, it’s really just a version of premium finance, which is a strategy that furry high net-worth individuals use. This laddering of policies is really just poor man’s premium finance or homegrown premium finance. And the way how they’re different is with infinite banking, it’s all about, hey, I’m going to pump my money into this policy for better long-term growth and some tax arbitrage And when I need my money, I’m going to borrow against it for other things.

Premium finances, I’m using my money for other things. I don’t have a lot of money for insurance. I know I want it. I know I need long-term.

So I’m going to borrow money instantly to fund the policy, and get this long-term arbitrage off the policy.

Now note that there’s really no access to the policy with premium finance. And the same is true if you’re borrowing against one policy at another to fund another to fund another. It’s kind of like those Russian dolls. Right? Every time you start a new policy, you have to take a step back before you start to take these leaps forward. And that could take a couple few years with traditional infinite banking. Now when you’re stacking with all these policies, you’re also compounding that ramp-up period.

The same I’ve seen out there with IUL, basically they’ll have you start a really big policy and then just kind of lay in and put in this much and then borrow that and then pay some more again, a lot of times I think it’s just a ploy to sell more insurance, and you have to be really cognizant about what your access is and really what the maintenance is to maintain all of this homegrown premium finance. I don’t recommend it and I think that if control is your goal, then IBC is the better way to go.

You did it. You got through all nine IBC lines. So what’s next?

Well, now you probably want to see some data, and we have it for you, even if you’re not ready to talk to a human yet. Just go to to see the latest iterations of whole life policies optimally designed for infinite banking, and that’s going to range from the policy with the best early cash all the way to the policy with the best long-term performance. And you’re going to see that there are some trade-offs for each and a lot of companies in between.

Now obviously there are all kinds of qualitative factors too, flexibility, how and when you’re going to use the loans, retirement stuff, other riders, like chronic illness writers, if you really want to get the best out of your experience, watch the video to see the lay of the land, but book a meeting on our calendar so that you can have a consultative approach to understanding what your situation’s like and figuring out what’s best. Maybe of multiple family members and you can break up the best of both worlds between different policies on different bodies. These are all things that we can help with.

Again, we don’t hard sell. We don’t push, we don’t pressure. We just lay out the toolkit, help you understand your options, and let you pick what’s best for your family. What I can tell you is there’s been no better time than right now to do it because you’re not getting any younger (and you’re probably not getting any healthier).

And even if you do have some issues, we also know which companies are more forgiving with certain things than others, and we can help route you to the right place. So, book a meeting on our calendar, and we hope to talk to you soon.


John “Hutch” Hutchinson, ChFC®, CLU®, AEP®, EA Founder of
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