E82: Astonishing Reasons Why Banks Buy Whole Life Insurance

In this episode, we discuss the most prominent reasons why banks purchase so much whole life insurance. You’ll learn the secrets from them by following in their footsteps.

Banks are in the money business, obviously. So, if they’re in the money business and they’re buying a product of which you’re being told not to buy, you should start asking why we’re told don’t buy whole life insurance.


  • How and why those people try to put you in a box
  • Why they tell you to do things they never would
  • What banks use whole life insurance for
  • Did you know the two biggest banks own $20 billion in cash value in whole life insurance?
  • BOLI
  • Exactly how banks use BOLI
  • The right way and the wrong way to use the infinite banking strategy

Episode Takeaways:

  • Ask yourself why banks buy tons of whole life insurance while you’re told not to do the same. Banks really buy life insurance because they need it for their tier-one capital.
  • As you stay in the typical financial box, you’re not ever going to be able to see what you can do.

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Podcast transcript for episode 82: Why Banks Buy Life Insurance

Nate: In this episode, we will discuss the most prominent reasons why banks purchase so much whole life insurance, and then also what we can learn from them by following in their footsteps. She’s Holly and she helps people find financial freedom.

Holly: He is Nate. He makes sense out of money. This is Dollars and Nonsense, if you follow the herd, you will be slaughtered. We keep talking about how I hear a lot of life insurance is bad or why do banks buy life insurance? I get asked that. Why would they buy such a product if we’re told why we shouldn’t buy it? Why do banks buy it? I’m going to say it’s a myth, but it’s not even a myth. One of the things out there is that people have to understand banks are in the money business, and if they’re in the money business and they’re buying a product of which you’re being told not to buy, I think you should start questioning why we’re being told don’t buy whole life insurance.

Nate: We really do feel like the world tries to put people in the box. And that’s where all financial institutions try to do. It’s easy to sell products, whether it’s financial product or any type of a product, when you put everyone in a box and you just try to get them to believe they’re in this box and they need this other institution to help them. All they have is what they know that these institutions told them. Banks tell people to do things every day that they don’t do because it doesn’t make sense for them to do it and they’re trying to convince us that it makes sense for us. And so we’ve all heard the issues from Dave Ramsey, Susie Orman, all these different people say that whole life insurance is a poor place to put money. So that’s what we believe in. Banks would probably say the same thing.

But then whenever you go out and you look and what banks are actually doing with life insurance policies, you start to realize that maybe they know something that we don’t know and maybe they’re using this product in a different way than what most people think that the product’s supposed to be used for. So they’ve just gotten creative. And I guess that’s what we’re trying to bring them to the forefront today, Holly, is that we believe everyone should not be a cookie cutter, that we should all be creative in what we decide to do. We can learn from what banks do that’s outside the box and so we can kind of get out of what’s the norm and think differently. That’s the hardest thing, by the way, for most people when they get started with infinite banking, this concept of using life insurance as a bank, it takes a completely different perspective and a different way of thinking to really grasp it and to really utilize it the way it’s supposed to be used. And it can be hard to make that jump.

So we have to use our imagination, we have to be creative and we can take clues from these people. So let’s, we’re going to talk about today, is why banks buy life insurance, and what can we learn from them?

Holly: Banks really buy life insurance because they need it for their tier one capital. Better than anything, it’s cash. It’s a way to have liquid cash at your hands, to be able to use a product that can grow for them tax- free. Yes, it is a place that they can use their money over and over again.

Nate: So the tier one capital at a bank is the banks lifeblood. For those of you who don’t know how banks are run, banks lend money that doesn’t exist, which is awesome. I know, I wish we all had that privilege. It’s called the fractional reserve lending system. They have to have a certain amount of tier one capital, which is their liquids safe money. They have a certain amount in order to make loans. And the amount of loans they’re allowed to make by law is dependent upon by regulation is dependent upon how much tier one capital they have. So they’re all trying to boost their tier one capital so they can legally make more loans. That’s what they want to do.

Well, whole life insurance policy, the reason they have so much money, by the way, to give you guys some perspective, Wells Fargo and Bank of America, two of the biggest banks in our country, are both sitting at around $20 billion in cash value in whole life insurance, which to a bank is called Boli, B-O-L-I, central bank owned life insurance.

So they buy it to really boost up their tier one capital because life insurance policies are safe and it can be classified as essentially, they’re completely liquid safe capital. They think it’s one of the best places for tier one capital to be. They put as much of it in that and boldly as they can because they know how profitable it is to use a life insurance policy to make loans and to do things as opposed to just letting money sit in the vault, which does nothing.

So they’re being smart, they’re being creative. They’re like, how can we take this money that’s sitting around that we need to have in order to make these other loans, how can we make that and make even more money for us? And that’s when they started buying life insurance policies. And Holly, who do they buy policies on, by the way? That’s a question we get all the time. Like, yeah, banks own this, who are they buying life insurance policies on?

Holly: They buy it on employees, people that work for them. And the reason they buy it is because a life insurance policy has to be on an individual, a person. Can’t be on necessarily an entity. So they buy it on the person and they don’t care if that person stays with them for the next 20 years or leaves them nine months later. They only needed it at the time, an insurable interests at the time they bought it on the employee. So basically, an employee can jump ship whenever they want, but the bank doesn’t have to get rid of that life insurance policy. It’s still the bank’s policy. They still can put money in it and they still can use it. What better way of safeguarding your money? It doesn’t matter if the employee leaves. It doesn’t belong to the employee. The bank owns it. But they use the employee’s life for it.

Nate: Yeah. The bank needs a body to insure so they can own a life insurance policy that allows them to lend other people money and make more money by the fact that they own the policy. They don’t have to buy it. But that makes sense. And that’s what we’re trying to say. If we’re going to mimic some things about how we’re going to operate off of what banks do, and if they think it’s a wise decision to put money into a life insurance policy first before they use it for all the other things that banks do, mainly lending, then maybe it would make sense for us to also run money through policies, to do it the same way, in other words, the infinite banking concept becoming a maker. It may be new to you for some of you that are listening, but that’s just because you haven’t been introduced to it in the world that you’re in, but if you were in a different field, it’s very possible you to hear about it, whether it’s called infinite making or not, but regardless, the fact that life insurance policies are a great place to run money through and to keep money moving is very common in the corporate world at higher level companies, but maybe not as much for us.

Which makes me wonder why do people like Dave Ramsey, [inaudible 00:06:51], some of these prominent financial gurus of sorts, why do they always say how life insurance is a terrible place for money? I’m wondering if they’re ignorant, which is possible, or if they really think they know more than fortune 500 companies and the financial teams that they hire. I’m just curious, do they think everyone’s a sucker who buys it in reality? Or are they that arrogant? Or are they just ignorant? I don’t know, but either way, there must be a reason that banks buy it and the question is, can you and me do the same thing the banks do on our own level and achieve similar results that the banks do? And maybe all that simply means you’ve got to change your perspective on what the product should be used to do.

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Holly: For me, I have to believe the banking world is pretty smart because they’re in the money business. The families that own the banks, if they are putting so much money in something that is so horrible, why would they keep doing it? They’re in the money business, and we have to ask ourself that. Do you want to put your money somewhere where banks are not putting it and they actually are in the money business? Or do you want to do what banks are doing? And if banks are buying a product that’s so horrible, then it either can’t be that bad or they do know something you don’t know.

Nate: Exactly, and I think for a lot of people that’s really what we’re trying to do. We’re educators. We’re not salespeople, Holly, me and the rest of us are living well. We just simply are telling people things that they didn’t know about life insurance. There’s no twist or hooking to it. We’re just simply saying, “Hey, this is what you can do with a policy that you probably didn’t know you could do with it. It probably does things that you weren’t aware of,” mainly because the life insurance industry is in a terrible job, but they’ve always been focused on the death benefit side, not the cash value side. For whatever reason, they’re focused on selling the death benefit. And while that’s valuable, that certainly is kind of getting the short end of the stick.

So banks buy life insurance for very specific reasons. They need to have liquid capital to lend other people money. They want it to have a return and they cannot take any risk with it. I think every individual family needs to have their own tier one capital. And it should be in the same place that the banks keep the majority of their tier one capital. And by doing so, and just mimicking them and using these policies the same way that they use them, you can make a lot more money than if you just do it the way the world wants you to do it. The bank says, “Hey, come have your money sit with me in the savings account. That’s where you should keep your safe money.” And then they take their safe money and they go buy policies with it. I would say maybe they know more than you know and maybe you should just do what they’re doing and put your safe money into a policy.

And they actually have more than just that. They also lend against and do things with it, and the same thing you could do as well to make other investments, which we can talk about. But regardless, take an idea from what they’re doing and say, “Maybe what they’re telling me to do is just allowing them to make more money. Maybe I should just cut them out and do what they do,” and that’s the essence of what infinite banking is all about.

Holly: The banks are putting their money too in a life insurance policy because they still never lose control of it, do they Nate?

Nate: No.

Holly: They haven’t lost control of the money. Just because they took it and used it in a different product or vehicle, didn’t mean they lost control of it. They’re not taking their money, banks and their tier one capital, that is their bread and butter per se, and losing control of it. They’re never giving it over to somebody else to control and tell them what to do with it. Instead, that’s what we’re doing. And if we want to stop the cycle, you guys have to start taking control of your money. And it must be safe if banks are doing it. It’s safe for them putting it in a bank.

Nate: And they’re not going to go put their money in other people’s banks to hold their tier one capital, they just go buy life insurance.

Holly: And they do it because they know how the product works. They know what it can do. And so why would we want to differ at all from what a bank is doing? Instead we get to control our own money. We get to use our own money and we can mimic what banks are doing with our money right now and do it ourselves. And I think that has such great power, to understand that you can make sure you never lose control of your money.

Nate: Yeah, and this is one of the things I tell everybody when they get started, with infinite banking, you need to come into it thinking like you’re getting into the banking business. I feel like that it has to be a part of the equation. So we’re going to mimic the banks, but you need to graduate your thinking up to where you feel as if you are in the financial business and you are trying to make every dollar you have as profitable and efficient as possible, just like you would if you own a business and you’re trying to make that business as profitable and efficient as possible.

Nate: So that has to be your mentality coming into infinite banking. It’s not just sending money in a 401k, it’s getting into the banking business, doing what the banks do on your own scale, trying to make your money as efficient and profitable as possible just like you would be if you did own a banking business. That’s the first step you need to get in and stop thinking like a saver of money and start thinking like you’re in the banking business. How can you make your money work harder for you? That’s where you can really start being more creative because you’re actually going to make plans and think of strategies and ideas to improve your situation as opposed to just whatever will be will be and I’ll just put my money some place and hope it grows. That’s the old way. That’s the box way. Really it’s time to jump out.

Holly: The hardest part is getting outside of everything you’ve been taught to believe in, that you thought was true and really changing your mindset and making a shift and get outside the box thinking. Because as long as you stay in the box, you’re not ever going to be able to see what you can do, because you’re relying only on what everybody else is telling you, instead of actually researching it for yourself. It is amazing to me how many people work in a bank and still don’t even understand bank on life insurance.

Nate: I’ve talked to bank presidents who the bank has bought policies on them and they didn’t know why. Just because at the bank doesn’t mean they even know what’s going on.

Holly: It’s not the employees at the bank that are realizing what’s going on, it’s the individuals and the families that own the banks that are doing this. And so that’s why Nate said, it should be your mission, you have to think you’re creating a bank. It is a legitimate business of which you are going to work and actually understanding what you can do with it. And it’s not like you’re out there on your own trying to figure it out. That’s why we’re here, like Nate said, to educate you, but you guys got to start. You got to get outside the box. You got to get off the hamster wheel. You got to get outside the box and you’ve got to start thinking for yourself and asking yourself the same questions I asked many, many clients, do you think banks are stupid? No. Do you think they’re in the money business? Yes.

Holly: So if they’re doing this with their money, why aren’t you? Honestly, why are you guys not? It’s one of the best places I’ve ever found, and I think the best to put liquid capital.

Nate: The people who are Lords of liquid capital, the banks, are doing it and so just take a clue from them. So banks buy in a whole bunch. I think we should too. It takes a little bit of different perspective. You’ve got to be willing to learn and willing to think a little bit differently than the world tends to think. Think a little bit more openly. It’s going to take a little bit of imagination and mind stretch, but I think end of the day, if you were to do it, you’d love it. If you are listening to this podcast and already had policies, you need to make the switch to where you think you’re in the business and you are trying proactively to make it work better for you, not just waiting for Nate or Holly to call or something. You want to say, what can I do to make my money work harder for me? And when you have that mindset, things will go very well for you. But at that, it looks like we’re about at a time. This has been Dollars and Nonsense, if you follow the herd, you will get slaughtered.

Holly: For free transcripts and resources, please visit living wealth.com/e82.