The IBC Policy, Which Policy Does Nash's Concept Actually Use?

People type the phrase "infinite banking policy" into a search bar because they have heard that a special kind of policy sits at the centre of Nelson Nash's financing idea. They expect a product. In the Canadian insurer documents reviewed for this guide, no contract is sold under that name. What exists is participating whole life insurance, sold under each insurer's own product name.

That matters, because a label with no fixed meaning can be attached to almost anything. It can be attached to a well-designed participating policy. It can also be attached to a universal life policy, a policy with little early cash value, or a contract nobody explained properly. This guide shows what the words usually refer to, how to recognize that contract in a Canadian insurer's documents, which American claims do not apply here, and what the name does not promise. It is written by someone who is paid by insurer commissions when a policy is bought, which is worth knowing as you read.

What is the so-called infinite banking policy?

No Canadian insurer sells a product by that name. The words are shorthand for a participating whole life policy, usually designed for early cash value, that its owner uses to finance purchases through policy loans from the insurer and then repays on a schedule.

So the phrase describes two things at once: a contract and a way of using it. The contract is ordinary. It is participating whole life insurance, the kind the Autorité des marchés financiers (AMF) describes as whole life that gives the right to dividends, which are not guaranteed and which the insurer may reduce. It has a premium fixed at issue, a death benefit for life, a table of guaranteed cash values and a policy loan provision.

The way of using it is what gives the label its meaning. The owner builds cash value first. Later, instead of taking a car loan or drawing on a line of credit, the owner asks the insurer for a policy loan, secured by that cash value. Then the owner repays the loan, with interest, on a schedule at least as strict as an outside lender's. That habit, repeated over decades, is the idea Nash described.

So the label names a contract plus a repayment habit. Neither part is a product of its own, and neither part is secret.

This is also why two people can use the same words and mean different contracts. One means a participating policy with a large share of optional deposits. Another means the insurer's standard participating plan. A third, less carefully, means any permanent policy with a cash value. The rest of this guide helps you tell which one is in front of you.

Why does no Canadian insurer sell a product by that name?

Because insurers sell contracts, not strategies. Each one publishes its participating whole life plans under its own product names, and the deposit feature that builds early cash value also has a different name at each insurer.

An insurer issues a contract with its premiums, guarantees, options and loan terms. How an owner later uses the cash value is up to the owner, within the contract. A borrowing habit is not something an insurer issues, so a label for that habit does not appear on the contract itself.

The table below lists the participating whole life products named on the websites of several Canadian insurers, as consulted on 30 September 2026, with the name each uses for extra deposits. It is a guide to the vocabulary, not a comparison or a recommendation. Product names change, and the insurer's current documents always govern.

Two points follow from the table. First, the thing to ask for is a participating whole life plan and its deposit option, by the insurer's name. Second, some insurers publish two versions of the same plan, one aimed at early cash value and one at the long-term death benefit. The early-cash-value version is the one most often meant by the phrase. How that design works, lever by lever, is covered in the guide to high cash value life insurance.

Which contract does Nash's book actually describe?

Dividend-paying whole life insurance. Nash preferred a mutual company but said some stock companies had dividend-paying policies that performed very well. He did not name a product, a rider percentage or a design formula.

Nash's book, published in 2000, sets out the approach known as The Infinite Banking Concept®, which the cornerstone guide to the concept explains in Canadian terms. In Part III, Lesson 3, his illustration uses dividend-paying whole life as the place where capital is stored. The character he describes pays large premiums to a mutual company. Then Nash adds an exception in his own words: "there are some stock companies that have dividend-paying policies that perform very well."

Three things are worth noticing. The contract he names is a type, not a brand. His preference for a mutual is a preference, not a condition. And the details that American sales material often attaches to his name, such as a required percentage of paid-up additions, a "non-direct recognition" insurer or a term rider blended in to raise funding room, are not found in the lesson that describes the policy. They may be reasonable design questions. They are not Nash's rules, and they should not be presented as if they were.

His book was also written for American law. The behaviour he describes carries over to Canada. The tax rules, the funding limits and the vocabulary do not, which is why a Canadian reader needs a Canadian description of the contract.

What makes a participating policy suited to this use?

Four features: guaranteed cash values, a participating account that can pay dividends, a way to add deposits beyond the base premium, and a loan provision. The design decides how much cash value appears early and at what cost to the death benefit.

The guaranteed cash value is the floor. It is set out in a table in the contract, year by year, and it does not depend on dividends. The amount you can borrow is a different figure. It depends on today's cash surrender value, which can be higher once paid-up additions are counted, less any loan already owing, within the contract's limit. Ask the insurer for today's cash surrender value, the debt outstanding and the maximum loan, rather than working it out from the guaranteed column.

Dividends come from the insurer's participating account. They are not guaranteed. If declared, they can be taken in cash, used to reduce premiums, left on deposit, or used to buy paid-up additions, which are small amounts of fully paid insurance that carry their own cash value. The paid-up additions guide explains how each addition works.

A deposit option, where the contract offers one, lets the owner pay more than the base premium, within limits the insurer sets and the exempt test allows. At Equitable Life of Canada, for example, each deposit under the Excelerator Deposit Option buys paid-up additional insurance and carries a premium load of 8%, to cover compensation, premium tax and administration. Deposits of this kind are often the largest single reason one participating policy shows more early cash value than another. Eligibility, yearly room, the load and the rule for a missed year differ by product, so ask for them in writing.

Insurers also publish a dividend scale interest rate. It is one input the insurer uses to set dividends. It is not the return on your premiums. Your policy grows by less, because part of each premium pays for insurance, expenses, premium tax and compensation. Your own result is the year-by-year cash value in your illustration, guaranteed and non-guaranteed.

The loan provision lets the owner borrow from the insurer, secured by the cash value, up to a limit the contract sets. Other routes can also reach the value while the coverage stays in force. The AMF also describes a loan from another lender with the policy as collateral, and reduced paid-up insurance, and some contracts allow a withdrawal. Each route has different costs, approvals and effects on the coverage.

A policy designed for early cash value trades some death benefit for each dollar of premium. That can be the right trade for someone who wants to use the cash value. It can be the wrong one for someone whose main need is the largest possible death benefit for the family. The design is a choice, and the illustration shows its cost.

How can you tell a participating whole life policy from others sold under the same label?

Read the contract, not the label. A participating whole life policy says "participating" in its documents, names its dividend options, includes a table of guaranteed cash values and has a loan provision. Term, universal life and non-participating whole life each differ on at least one of these.

The label can be attached to other contracts, sometimes innocently and sometimes not. The table shows how the usual candidates differ on the points that matter for this use. It lists attributes only. Each contract can be the right one for a different need.

The comparison pages go further: participating and non-participating whole life, and participating whole life beside universal life.

When you have an illustration or a draft contract in front of you, check these points one by one:

1. The product name and the word "participating" appear on the first pages.
2. The dividend option chosen is written down, and so is the list of options you can switch to.
3. A table of guaranteed cash values appears, separate from values that assume dividends.
4. The deposit option, if any, is named, with its yearly maximum and the rule for a missed year.
5. The policy loan provision states how the rate is set, the maximum loan and what happens if the loan grows larger than the cash value.
6. The premium period is stated: for example 10 years, 20 years or to age 100.
7. The illustration says it assumes the current dividend scale, and shows at least one lower scale.

If any of these is missing, ask why before you go further. A contract that fails the first three is not the contract the phrase usually refers to, whatever it is called in conversation.

How does a policy loan work in Canada?

The insurer lends you money, secured by your cash value. Interest is charged at a rate the insurer sets and can change, unpaid interest is added to the loan, the part above the adjusted cost basis is taxable, and a loan that grows past the cash value can end the policy.

The AMF puts it plainly: a policy loan is borrowing with the cash surrender value as collateral, it must eventually be repaid with interest, and anything still owed at death is subtracted from the insurance payable. The Financial Consumer Agency of Canada (FCAC) adds that an unpaid loan can reduce what the beneficiary receives and what you get back if you cancel. The owner does not lend to themself in any legal sense. The insurer is the lender, and the interest is the insurer's income.

Another lender can also be used. The AMF notes that you can borrow from another financial institution using your insurance as collateral. That lender decides whether to approve the loan, sets the rate and the repayment terms, and is repaid from the death benefit under the assignment if the debt is still owing. Under the definition of disposition in subsection 148(9) of the Income Tax Act, assigning a policy to secure a loan other than a policy loan is not a disposition, so the assignment alone does not create taxable income. The loan is still a debt that must be serviced.

The table sets out the points that most often surprise people. The full mechanics are in the policy loans guide.

Two further points depend on the insurer. Equitable's dividend policy (November 2023) states that policy loan interest affects the dividends of the class. Canada Life's advisor guides for its participating products state that additional deposit option payments are not accepted while a policy loan is active. So borrowing can change how the policy grows, not only what you owe. The guide on when a policy loan becomes taxable shows how to read the adjusted cost basis on a statement.

The adjusted cost basis also moves with borrowing. It rises with premiums, and with loan interest paid to the insurer unless that interest is deducted, and it falls each year by the net cost of pure insurance. Each policy loan lowers it, so every loan leaves less room before the next one becomes taxable. Repayments add it back, within limits, and repaying a loan that was taxed gives a deduction under paragraph 60(s). Ask the insurer for the current figure in writing before borrowing.

Which American claims do not apply in Canada?

Much of what is written about this subject comes from the United States, where the tax law and the vocabulary are different. The funding limit, the tax on loans and the words for the deposit rider all change at the border.

American material is easy to find and often well produced. The trouble is not bad faith. It is that a rule true in one country is repeated in another where it is false. The table puts the common American claims beside the Canadian position.

The exempt test deserves one more sentence, because it sets the ceiling on every design. For most policies issued after 2016 on younger lives, each anniversary the policy's savings are compared with those of a benchmark policy paid over eight years that endows at age 90; the endowment age is later at older issue ages, under section 310 of the Regulations. For policies issued before 2017, the benchmark was generally paid over 20 years and endowed at 85. According to Canada Life's published analysis of October 2021, the 2017 change reduced the room for extra deposits in participating policies. The exempt test glossary entry explains the rest. For a wider list of American ideas that do not survive the border, see American videos on this strategy and Canadian law.

Does it matter whether the insurer is mutual or shareholder-owned?

Less than American material suggests. In Canada, most large issuers of participating whole life are shareholder-owned. For insurers incorporated under the federal Insurance Companies Act, one federal guideline governs how the participating account is managed and dividends are explained.

The Office of the Superintendent of Financial Institutions (OSFI) lists four federally regulated life insurers that demutualized: Canada Life, Manufacturers Life, Sun Life and Clarica. At each conversion, the existing participating policies were placed in a closed block, and OSFI states that their coverage, values, premiums and dividends were not affected. Industrial-Alliance, now iA Financial Group, converted to a stock company in 2000. Mutual insurers that still issue participating whole life include Equitable Life of Canada and Assumption Mutual Life.

For insurers incorporated under the federal Insurance Companies Act, OSFI Guideline E-16 sets expectations for managing the participating account and disclosing dividend practices. It says that dividends cannot be guaranteed and that allocation methods must be fair and equitable to participating policyholders. For a shareholder-owned federal insurer, the Insurance Companies Act limits how much of the participating account's profit may pass to shareholders. Insurers chartered in Quebec, including the insurance company of iA Financial Group, are supervised by the AMF under Quebec's Insurers Act. Whatever the insurer, ask for its published dividend policy and its policy for managing the participating account.

So the useful questions are practical ones. How is the participating account invested? What is the insurer's dividend policy, and how has the scale moved over time? How does an outstanding loan interact with dividends? The answers come from the insurer's documents, not from whether it is mutual. The participating life insurance guide explains the participating account in more detail.

Is the so-called infinite banking policy legal in Canada?

Yes, in the sense that the contract is ordinary participating whole life insurance, sold by a licensed representative under provincial rules. The problems arise in how it is sometimes described and sold, not in the contract itself.

A participating whole life policy is issued by a regulated insurer and sold by a representative licensed in the buyer's province, such as a financial security advisor licensed by the AMF in Quebec. Nothing about using its loan provision is unlawful. Many people ask whether the idea is a scam. The contract is not. What deserves scrutiny is the promise wrapped around it.

The words are a metaphor, not a statement that anyone operates a bank. Section 983 of the Bank Act restricts certain business uses of the words "bank", "banker" and "banking"; whether a particular name or advertisement falls within it depends on how the word is used and on the exceptions in the Act. Premiums are not deposits, and the Canada Deposit Insurance Corporation does not cover insurance policies. The protection that applies is Assuris, which protects whole life policyholders if a member insurer fails: death benefits up to $1,000,000 or 90%, and cash values up to $100,000 or 90%, whichever is higher in each case, net of policy loans. Assuris states that dividends may be adjusted after a failure; it does not protect against a lower dividend scale.

The warning signs are the same ones regulators watch for in any insurance sale:

1. Returns described as guaranteed when they depend on dividends.
2. Loans described as free, or as if the owner were lending money to themself.
3. A policy presented as an investment account.
4. Pressure to replace an existing policy or to fund premiums by borrowing, without a written comparison.
5. No mention of how the representative is paid.

Each of these is corrected in claims that should never be made about this approach.

What does the name not promise?

A name carries no guarantee. What is guaranteed is in the issued contract: check which premium, base death benefit and cash values its schedule guarantees, and keep them apart from values that assume future dividends. Dividends, loan rates and tax results are not guaranteed; they depend on the insurer, the law and how the policy is used.

It helps to list what people sometimes hear in the phrase and set it beside what the contract actually provides.

The last line is the one that matters most. The contract can hold capital and lend against it. It cannot make anyone repay. Nash put repayment at the centre of his idea for that reason, and a policy used without it becomes a slowly shrinking death benefit with a growing loan. Why a policy is not an investment, even when used this way, is covered in life insurance is not an investment.

What does such a policy cost, and who is paid?

It costs much more than term insurance for the same coverage. Early cash values can be lower than the premiums paid, deposits may carry loads, loans carry interest, and the representative is usually paid a commission by the insurer.

The FCAC notes that term premiums are generally lower than permanent premiums when you first buy a policy, and that if you cancel a permanent policy, the cash value you get back would be less than what you paid in premiums. On most designs the gap is widest in the early years. The AMF notes that participating insurance is usually more expensive than non-participating insurance. The extra buys lifelong coverage, guaranteed values and the right to dividends. Whether it is worth it depends on whether you need permanent coverage and can fund it in an ordinary year, not only in a good one.

Here are the costs to find in your own documents:

1. The premium, and for how many years it is payable.
2. Any load on extra deposits, stated as a percentage.
3. The guaranteed cash value in years 1, 5 and 10, compared with total premiums paid by then.
4. The current policy loan rate, and how the insurer sets it.
5. How the representative is paid for arranging the contract, and by whom.

The last item is not a formality. A representative paid by commission is not a neutral party, and you are entitled to ask. The guide to the real costs sets out the early years in detail, and risks and failure modes shows how policies fail and for whom.

What should you ask before you sign?

Ask the insurer, in writing, about deposits, loans and dividends. Ask your accountant about tax. Ask the representative about the design, the fit and how they are paid.

Questions for the insurer:

1. Is this contract participating, and which dividend options can I choose and change later?
2. What is the yearly maximum for extra deposits, and what happens if I skip a year?
3. How is the loan rate set, what is it today and how has it changed in recent years?
4. How does an outstanding loan affect dividends and extra deposits under this contract?
5. What is the maximum loan, and how will I be told if the loan approaches the cash value?

Questions for your accountant:

1. What is my adjusted cost basis likely to be in the years I expect to borrow?
2. Would a loan of the size I have in mind create income, and how much?
3. Does the premium still fit an ordinary year after taxes and other savings?

Questions for the representative:

1. In which year does the guaranteed cash value first exceed the premiums paid?
2. How much of the design is optional deposits, and what happens if I stop them?
3. Why this amount of coverage, and why this premium period?
4. What lower dividend scale did you illustrate, and what does it show?
5. How are you paid for this contract, by whom, and what would lead you to advise against it?

The AMF suggests checking whether a less expensive type of insurance, with the savings contributed to a TFSA, RRSP, RESP or pension plan, would serve you better, and it describes participating insurance as generally intended for an affluent clientele. This practice gives no general ordering between those plans and a policy. The table shows what each route is for, and a professional licensed to advise on registered plans can compare them with your own figures.

What this page will not tell you

It will not tell you which insurer or product to choose. The table of product names is a guide to words, not a ranking. It gives no loan rate, no dividend scale and no premium. Those come from the insurer, in writing, for your own contract.

Some topics are left out on purpose. This page does not cover policies owned by a corporation. It does not cover using a policy loan to pay premiums. It does not give the full rules for a policy whose loan grows larger than its value. It does not cover creditor protection or beneficiary designations, which follow the Civil Code in Quebec and provincial insurance acts elsewhere. Where the owner is not the person insured, or where policy loan money is lent on to a relative, the debts and rights change; lending within a family is covered in capital held within a family. Each of these can change the answer.

Nash's lesson numbers refer to the published editions of his book, and page numbers differ from one edition to the next. The terms of any policy are those of the insurer that issues it. Nothing here is tax or legal advice. Check your own case with your accountant, and with your lawyer or, in Quebec, your notary.

Who this does not suit

A policy bought for this use is permanent insurance first. If you have no real need for lifelong coverage, if your income could plausibly miss a year of premiums, if you may need the money in the first several years, or if high-interest debt is already straining the budget, other steps will likely serve you better first. The same is true if you want a quick result: the cash value that makes the idea work takes years to build, and it only keeps working if every loan is repaid.

If you are still curious, start with the contract, not the label. Ask for an illustration of a participating whole life plan, read the seven points listed earlier, and compare the guaranteed column with the premiums you would pay. The becoming a client page explains what a first conversation covers and what it does not.