Chris Miles has noticed a disturbing trend gaining traction lately: an increasing number of insurance agents are falsely promoting Indexed Universal Life (IUL) policies as being equivalent to infinite banking. According to Chris, this is absolutely false. Falling for this misconception could cost individuals thousands, if not millions, of dollars over time.
Having sold IUL policies before they became popular—nearly 20 years ago—Chris feels a responsibility to set the record straight. After spending years training other agents, Chris ultimately stopped selling IULs upon recognizing their significant weaknesses.
One of the most important distinctions Chris emphasizes is that infinite banking is a strategy, not a product. The Nelson Nash Institute designed it specifically for whole life insurance, not IULs. Nelson Nash himself stated that IULs do not work for infinite banking purposes.
Chris hopes more consumers and agents alike will take the time to understand the foundational principles of infinite banking before making long-term financial decisions based on misleading claims.
Why IULs Fail as Infinite Banking Vehicles
Index Universal Life policies have fundamental flaws that make them unsuitable for the infinite banking concept:
- They have surrender fees that lock your money away
- They use one-year renewable term insurance, meaning costs increase every year
- They focus on providing long-term supplemental retirement income, not short-term liquidity.
Chris, who has decades of experience in the insurance industry. This includes a time when he sold IULs before their popularity surged—feels a deep obligation to call out these misleading practices. He warns that too many insurance agents are pushing IULs as infinite banking tools without fully disclosing their limitations. Chris urges consumers to proceed with caution and choose insurance agents who stay well-informed and commit to full transparency and client-first advice.
The Misleading IUL Sales Pitch
The agent presented a scenario where a 33-year-old business owner invested $1,000 per month ($12,000 annually) in an IUL. She claimed that by age 65, the owner “will have” $1.2 million available to generate $108,000 of annual tax-free income that she cannot outlive.”
Here’s what the agent conveniently didn’t mention:
- The projection showing $1.2 million is not guaranteed
- She only showed the most optimistic scenario (likely assuming 7%+ returns)
- She skipped over the guaranteed and moderate return scenarios that showed the policy running out of money
- The claim that the income “cannot be outlived” is dangerously misleading
What is particularly concerning is how IUL illustrations have evolved over time. When I sold these products 20 years ago, cap rates (the maximum you could earn) were 10-17%. Today, most cap rates have been reduced to 7-9%. This means that if the market returns 30%, you still only receive the capped amount.
How Whole Life Compares for Infinite Banking
When Chris ran a direct comparison between a properly structured whole life policy and an Indexed Universal Life (IUL) policy—using the same scenario of a $12,000 annual premium for a healthy 33-year-old—the results were revealing.
From day one, the whole life policy provided $9,800 in cash value, compared to just $7,800 with the IUL. That’s $2,000 more in accessible cash immediately, with no surrender charges or hidden fees.
By year seven, after $84,000 in total premiums, the whole life policy had grown to $91,000 in cash value, while the IUL came in at $86,000—and that was using a conservative 6% illustration rate.
Looking ahead to age 65, the IUL is projected to have a non-guaranteed cash value of $1.2 million. At the same time, the whole life policy showed a value of $975,000—slightly less, but backed by guarantees, stable growth, and zero exposure to market volatility.
Chris highlights one key reason for this confidence: the mutual company he uses has paid dividends above the guaranteed minimum every year since 1847—nearly 180 years of consistent performance, weathering every financial crisis from the Great Depression to the 2008 recession.
In Chris’s view, the trade-off is clear: a little less upside, but a lot more certainty, control, and peace of mind—exactly what infinite banking was built to deliver. Unfortunately, many insurance agents fail to present this comparison transparently, often pushing IULs without fully disclosing the long-term risks and variability associated with them.
The True Power of Infinite Banking
Chris explains that the real advantage of infinite banking with whole life insurance becomes evident once you fully understand how policy loans work.
If Chris has $1 million in cash value inside a whole life policy and takes a $300,000 policy loan, the entire $1 million continues to earn dividends and compound interest, as if no money had ever been removed. While he pays simple interest on the loan to the insurance company, his full policy value continues to grow.
This creates a powerful financial strategy: Chris can use the borrowed funds for cash-flowing investments while simultaneously earning compound interest on the full policy value. The investment income can then be used to pay down the loan, creating a leveraged wealth-building loop.
By contrast, most IUL policies don’t offer this feature. At best, they may provide a “wash loan”—where you don’t pay net interest, but you also don’t earn interest on the borrowed portion. Chris sees this as a missed opportunity for long-term compounding and true financial leverage.
He also notes a significant difference in how financial institutions view the two products: banks are willing to lend up to 95% of a whole life policy’s cash value, thanks to its growth. With IULs, many banks won’t lend at all—or if they do, it’s often capped at 65% due to the non-guaranteed, market-tied structure.
For Chris, this isn’t just about numbers—it’s about building a financial system that works in your favor, even when the market doesn’t.
The Right Time for Each Strategy
Chris is clear: he’s not saying IULs never have a place. They might make more sense after a market crash, when there’s more upside potential and volatility has cooled. However, with markets potentially overvalued and interest rates on the rise, Chris believes that whole life insurance offers far better protection and long-term opportunities.
Currently, Chris is utilizing his whole life policy as a cash reserve—a liquid pool of capital ready for emergencies or potential investment opportunities. Given what he sees as an ongoing economic bubble, access to stable, guaranteed capital is more important than ever.
Chris cautions others not to fall for the IUL sales pitch disguised as infinite banking—especially when it’s coming from insurance agents who either don’t fully understand the strategy or are intentionally misrepresenting it. He reminds people that infinite banking is a strategy, not a product, and that properly structured whole life insurance explicitly builds it.
Using the wrong tool for this strategy can cost people years of compounding growth, peace of mind, and financial control. For Chris, the message is simple: work with insurance agents who understand the difference—and who prioritize long-term outcomes over short-term commissions.
Use the right vehicle, and you can build a system that leads to financial freedom. Use the wrong one, and you risk costly disappointment.
Frequently Asked Questions
Q: What exactly is infinite banking?
Nelson Nash developed infinite banking as a financial strategy (not a product) that uses dividend-paying whole life insurance as a personal banking system. It allows you to borrow against your policy while your entire cash value continues to grow, creating a mechanism for financing purchases and investments while maintaining control of your money.
Q: Can’t I get better returns with an IUL since it’s tied to the stock market?
While IULs might project higher returns, they do not guarantee them. IULs have caps (typically 7-9% currently), limiting your upside when markets perform well. Additionally, the increasing insurance costs as you age can erode returns, especially during retirement when you’re trying to take income. Whole life provides more predictable, stable growth with current dividend rates around 6% tax-free.
Q: How soon can I access cash in a whole life policy versus an IUL?
Properly structured whole life policies provide more immediate access to cash value. In the example I shared, a whole life policy had $9,800 available in the first year compared to $7,800 in the IUL. Additionally, whole life policies don’t have surrender charges, while IULs lock your money up with penalties for early access.
Q: Why would banks lend more against whole life policies than IULs?
Banks consider whole life policies less risky because they have guaranteed cash values and a long history of dividend payments. Some banks will lend up to 95% of the whole life cash value. Many banks refuse to lend against IULs entirely due to their non-guaranteed nature and potential for value fluctuations. Those that limit lending to around 65% of the cash value.
