Glossary
Key terms and definitions for understanding IBC and whole life insurance.
Infinite Banking Concept (IBC)
A strategy developed by Nelson Nash for recapturing the banking function in your financial life using dividend-paying whole life insurance from a mutual company.
Banking Function
The process of storing, lending, and earning interest on capital. Every financial transaction involves the banking function — the question is who controls it.
Whole Life Insurance
A permanent life insurance product with guaranteed cash value growth, level premiums, and (from mutual companies) dividend participation.
Cash Value
The savings component of a whole life insurance policy. It grows guaranteed each year and can be accessed via policy loans.
Policy Loan
A loan from the insurance company using your cash value as collateral. Crucially, your cash value continues to earn dividends during the loan.
Paid-Up Additions (PUA)
Additional premium payments that purchase small blocks of fully paid-up insurance, dramatically accelerating cash value growth.
Mutual Company
An insurance company owned by its policyholders (not shareholders). Profits are returned to policyholders as dividends.
Dividend
A return of excess premium paid to policyholders by a mutual insurance company. Not guaranteed, but major mutuals have paid them for 100+ consecutive years.
Non-Direct Recognition
A company practice where policy loans do not affect dividend calculations — meaning your full cash value earns dividends even while a loan is outstanding.
Direct Recognition
A company practice where outstanding policy loans may affect (typically reduce) the dividend credited to the loaned portion of cash value.
MEC (Modified Endowment Contract)
A life insurance policy that has been overfunded beyond IRS limits (7-pay test). MEC policies lose some tax advantages, which is why proper policy design avoids this.
Velocity of Money
The concept that money can work in multiple places simultaneously. In IBC, your cash value earns dividends while your loaned capital is deployed elsewhere.
Becoming Your Own Banker (BYOB)
The foundational book by R. Nelson Nash (first published 2000) that introduces and explains the Infinite Banking Concept.
Austrian Economics
A school of economic thought emphasizing individual action, sound money, and free markets. Provides the philosophical foundation for many IBC principles.
Human Life Value
The economic concept that a person's earning potential over their lifetime represents their most valuable asset — and the basis for proper life insurance amounts.