IBC Lab · Educational sandbox
Pressure-test the Infinite Banking Concept with your own numbers.
Interactive model of a participating whole life policy designed for policy loans — premiums, paid-up additions, dividends, 7-pay MEC limits, and direct vs. non-direct recognition loans.
Cash value is the policy's surrender / collateral value. Net cash value subtracts any outstanding policy loan.
What these results actually mean
A plain-English read of your current design, the actions it implies, and which assumptions are doing the heavy lifting.
1. Commit $12,000 per year — and know which part is flexible
$6,000 is the base premium (contractually required to keep the policy in force) and $6,000 is the paid-up additions rider (50% of your outlay). The PUA portion is the dial you can turn down in a bad year; the base premium is not. Over 30 years this design puts $240,000 into the policy.
2. You're inside the 7-pay limit — keep it that way
Your $12,000 annual outlay sits under the $18,667 7-pay limit, so loans stay tax-free. Action: if you ever want to dump extra cash in, check the limit again first — a single overfunded year permanently taints the contract.
3. Plan around breakeven in year 3 (age 42)
That's when net cash value first exceeds every dollar you've paid in. Before then, surrendering the policy loses money. Action: keep a separate liquid emergency fund covering the first 3 years so you're never forced to unwind the policy early.
4. Use the policy as collateral, not a piggy bank
You haven't modeled a loan yet. The whole point of this design is borrowing against cash value while the full balance keeps earning dividends. Action: enable the policy loan panel and test the purchase you'd actually finance — a truck, a roof, a rental down payment — at a realistic rate.
5. Take one illustration to a licensed agent and compare it line by line
This model is an approximation. Ask a carrier for an illustration with the same $6,000/$6,000 split and compare the guaranteed column (not the projected one) to what you see here. If the guaranteed column doesn't work for you, the policy doesn't work for you.
Which assumptions move the outcome most
Each row changes one assumption and re-runs the projection. The effect is on year-30 net cash value (currently $974,966).
| Change one assumption | Net CV impact | % | New breakeven |
|---|---|---|---|
| Dividend rate 5.5% → 6.5% | +$232,552 | +23.9% | Year 3 |
| Dividend rate 5.5% → 4.5% | −$186,818 | −19.2% | Year 4 |
| Start 5 years earlier (younger issue age) | +$74,752 | +7.7% | Year 3 |
| Fund PUAs 3 more years | +$74,205 | +7.6% | Year 3 |
| Shift $1,000/yr from base premium into PUA | −$16,639 | −1.7% | Year 3 |
The dividend rate is the single largest unknown — it is declared annually by the carrier and is never guaranteed. If a one-point drop breaks your plan, the plan is too fragile. Talk it through with a broker →
Compare scenarios side by side
Save the current assumption set, change the sliders, then save again to see which design maximizes year-N net cash value. Saved scenarios stay in this browser only.
No saved scenarios yet. Save the current design, adjust your assumptions, and save a second one to compare them here.
Risk, suitability & common criticisms
Sanity-check the design against your cash flow, time horizon, and financial baseline. Educational scoring only — not a recommendation.
Red flags (2)
Strengths
- 20-year horizon is long enough for the design to compound.
Common criticisms of IBC — and what the model actually shows
- "Returns are mediocre." True in early years. Whole-life IRR is back-loaded; the simulator's breakeven year and net cash value curve make that visible — compare against your own opportunity-cost benchmark.
- "You're borrowing your own money — and paying interest." Policy loans are collateralized against the death benefit; the cash value keeps crediting. Direct-recognition carriers offset dividends on the loaned portion, which the recognition toggle models.
- "It's a tax shelter that can blow up." Over-funding past the 7-pay limit creates a MEC and forfeits the tax treatment. The MEC indicator above flags it before you commit.
- "Commissions are huge." First-year cash value is depressed because base-premium commissions and acquisition costs come out early. PUA riders carry far lower loads — that's why IBC designs lean heavily on them.
- "Term + invest the difference wins." Often true on a pure expected-return basis. The honest case for IBC is the combination of guaranteed cash value, creditor protection (Tex. Ins. Code §1108.051 in Texas), tax-deferred growth, and a collateral pool you actually use — not raw return.
Modeling assumptions
- Mortality: unisex Gompertz approximation. Real carriers use sex-distinct, smoker-distinct, fully underwritten tables.
- Cash value ≈ terminal reserve at guaranteed 4%. Carrier non-forfeiture values are usually a bit lower in early years.
- Base premium loaded 10%, PUA premium loaded 5%. Actual loads vary by carrier and rider.
- Dividend rate is hypothetical — not guaranteed. Dividends here buy paid-up additions.
- 7-pay MEC limit is a net-level approximation of IRC §7702A.
Want a real proposal with a specific carrier's current dividend scale and underwriting? Book a 20-minute call →