Have you heard Dave Ramsey’s opinion of Infinite Banking and Whole Life Insurance? He says it’s a scam, a joke, hogwash, horrendous, a pile of manure, old school life insurance done poorly, a jumbled word picture, you can’t cut through the BS, screwing people, and just doesn’t feel right.

https://www.youtube.com/watch?v=Jnbs0iANdMU

Today, we’ll separate opinion from fact, so you can decide for yourself if Infinite Banking is a scam (or not) based on knowledge and understanding.

So if you want to find out why the wealthy and independent thinkers have been using the profound guarantees and wealth-building strategy of Infinite Banking for centuries … tune in below!

Table of contentsAre Insurance Agents Financial Advisors?How Do Mutual Companies Work?What is a Dividend, and How is it Non-Taxed?Are You Paying for Your Own Money?What Happens When You Die?Is Whole Life Insurance Expensive? Summing Up What Dave Ramsey Says About Infinite BankingBook A Strategy Call

Dave Ramsey does a lot of good for a lot of people—he helps them to get out from under crippling debt and create better money habits. However, he has famously spoken against Infinite Banking, or what we often refer to as Privatized Banking. 

Are Insurance Agents Financial Advisors?

To evaluate whether infinite banking is a scam, it's important to understand who is giving the advice. When met with a question about whole life insurance, Dave Ramsey was not thrilled about the idea, to say the least. However, his first criticism was that the advisor who recommended insurance was only an insurance agent and not a financial advisor or planner. However, most insurance agents often have other certifications—like CFP (certified financial planner) or a Series 65 (for giving financial advice).

Just because someone is able to sell insurance does not mean they can’t sell investments or give advice. Insurance is simply one certification.

How Do Mutual Companies Work?

Infinite Banking works with mutual life insurance companies. Dave correctly identifies the difference between mutual companies and stock companies. Policy owners own mutual companies, while stockholders own stock companies.

This means that mutual companies pay profits to the policy owners, while stock companies pay profits to stockholders. Critics who call infinite banking a scam often overlook how mutual companies are structured to serve the policyholders. This is where his accuracy stops.

According to Dave Ramsey: “If you are the owner of the company and you’re also a customer of the company, and the only place the company gets money is from the customers that are owners, and they give you money from profit, by definition, that means it’s because they took too much from you as a customer. There wouldn’t have been a profit otherwise.”

This, however, is not true. The life insurance companies make profits outside of premiums paid into life insurance policies. Companies also make money from their conservative investments--many of which are corporate and treasury bonds, as well as derivatives, mortgage backed investments, and some equities. 

Policy owners receive dividends based on these profits after policy expenses. It’s not accurate to say that premiums are the only profits. His understanding of mutual companies is not accurate.

What is a Dividend, and How is it Non-Taxed?

Dave Ramsey says, "So the IRS has deemed, consequently, that mutual life insurance company dividends are not dividends, in the true sense of a dividend, that they are instead, and this is the IRS’s language 'the refund of a deliberate overcharge.' So they overcharge you in order to give you some money later and make you feel like you’re making money off of them. And it's absolute hogwash. It’s a pass-through. Mathematically, it’s a pass-through. It’s the way it has to be, it’s the legal definition the freaking company, and the IRS says so."

The government considers dividends non-taxable becaus...