function calculateInfiniteBanking() {
var annualPremium = parseFloat(document.getElementById('annualPremium').value);
var yearsPremiumPaid = parseFloat(document.getElementById('yearsPremiumPaid').value);
var cashValueGrowthRate = parseFloat(document.getElementById('cashValueGrowthRate').value) / 100;
var policyLoanRate = parseFloat(document.getElementById('policyLoanRate').value) / 100;
var externalLoanRate = parseFloat(document.getElementById('externalLoanRate').value) / 100;
var loanAmount = parseFloat(document.getElementById('loanAmount').value);
var loanRepaymentYears = parseFloat(document.getElementById('loanRepaymentYears').value);
var errorDiv = document.getElementById('calculatorError');
errorDiv.textContent = "; // Clear previous errors
// Input validation
if (isNaN(annualPremium) || annualPremium <= 0 ||
isNaN(yearsPremiumPaid) || yearsPremiumPaid <= 0 ||
isNaN(cashValueGrowthRate) || cashValueGrowthRate < 0 ||
isNaN(policyLoanRate) || policyLoanRate < 0 ||
isNaN(externalLoanRate) || externalLoanRate < 0 ||
isNaN(loanAmount) || loanAmount <= 0 ||
isNaN(loanRepaymentYears) || loanRepaymentYears estimatedCashValue * 0.9) { // Typically, you can borrow up to 90-95% of cash value
errorDiv.textContent = 'Loan amount exceeds estimated available cash value. Consider a lower loan or longer premium payment period.';
// Continue calculation to show potential benefit, but warn user
}
// 2. Loan Calculations (Amortization)
var calculateLoanInterest = function(principal, annualRate, years) {
var monthlyRate = annualRate / 12;
var numberOfPayments = years * 12;
var monthlyPayment = 0;
var totalInterest = 0;
if (monthlyRate === 0) { // Handle zero interest rate
monthlyPayment = principal / numberOfPayments;
totalInterest = 0;
} else {
monthlyPayment = (principal * monthlyRate) / (1 – Math.pow(1 + monthlyRate, -numberOfPayments));
totalInterest = (monthlyPayment * numberOfPayments) – principal;
}
return totalInterest;
};
var totalInterestPolicy = calculateLoanInterest(loanAmount, policyLoanRate, loanRepaymentYears);
var totalInterestExternal = calculateLoanInterest(loanAmount, externalLoanRate, loanRepaymentYears);
// 3. Recaptured Interest
var recapturedInterest = totalInterestExternal – totalInterestPolicy;
// Display results
document.getElementById('estimatedCashValue').textContent = '$' + estimatedCashValue.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",");
document.getElementById('totalInterestPolicy').textContent = '$' + totalInterestPolicy.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",");
document.getElementById('totalInterestExternal').textContent = '$' + totalInterestExternal.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",");
document.getElementById('recapturedInterest').textContent = '$' + recapturedInterest.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",");
}
Understanding the Infinite Banking Concept and How This Calculator Works
What is the Infinite Banking Concept?
The Infinite Banking Concept (IBC), popularized by Nelson Nash, is a financial strategy that involves using a specially designed whole life insurance policy as your own personal bank. Instead of relying on traditional banks or lenders for loans, you borrow against the cash value of your own policy. The core idea is to "recapture" the interest you would typically pay to third-party financial institutions, keeping that money within your own financial ecosystem.
This strategy aims to give you greater control over your money, allow for uninterrupted compound growth of your cash value (in non-direct recognition policies), and provide a source of liquidity for various financial needs, from business investments to personal expenses, without disrupting your long-term savings.
How Does This Calculator Work?
This calculator helps illustrate the potential financial benefits of implementing the Infinite Banking Concept by comparing the cost of borrowing from your own policy versus borrowing from an external lender. Here's a breakdown of each input:
Annual Policy Premium ($): This is the amount you consistently contribute to your whole life insurance policy each year. These premiums build up your policy's cash value, which serves as your "bank" or collateral for future loans.
Years Premiums Paid Before Loan: This indicates how many years you've been funding your policy before you decide to take out a loan. The longer you pay premiums, the more cash value you accumulate, increasing your borrowing capacity.
Estimated Annual Cash Value Growth Rate (%): This represents the average annual rate at which your policy's cash value is expected to grow, including guaranteed growth and potential dividends. This rate is crucial as it determines how quickly your "bank" expands.
Policy Loan Interest Rate (%): This is the interest rate charged by the insurance company when you take a loan against your policy's cash value. While you pay this interest, it's often paid back into your policy, or your policy continues to earn dividends on the full cash value (depending on the policy type – non-direct vs. direct recognition).
External Loan Interest Rate (%): This is the interest rate you would typically pay if you were to take a comparable loan (e.g., for a car, business, or personal need) from a traditional bank or financial institution. This serves as the benchmark for comparison.
Loan Amount ($): The specific amount of money you intend to borrow for your needs.
Loan Repayment Period (Years): The duration over which you plan to repay the loan, whether it's a policy loan or an external loan.
Understanding the Results:
After inputting your figures, the calculator provides key insights into the financial implications of using your policy as a bank:
Estimated Cash Value at Loan Time: This figure provides an approximation of the cash value accumulated in your policy by the time you plan to take the loan. It's the capital you have available to borrow against.
Total Interest Paid to Policy: This is the total interest you would pay on your policy loan over the specified repayment period. In the context of Infinite Banking, this interest is often viewed as being "paid to yourself" or retained within your financial system, as it either directly or indirectly benefits your policy's growth or your overall wealth.
Total Interest Paid to External Lender: This shows the total interest you would have paid to a traditional bank for the same loan amount and repayment period. This money leaves your control and contributes to the bank's profits.
Recaptured Interest (Benefit): This is the most significant result. It represents the difference between the interest you would have paid to an external lender and the interest paid on your policy loan. This amount is the "interest recaptured" – money that stays within your control and contributes to your financial well-being, rather than being lost to a third party.
Why is "Recaptured Interest" Important?
The concept of recaptured interest is central to Infinite Banking. By acting as your own banker, you effectively eliminate the opportunity cost of paying interest to external institutions. This allows you to keep more of your money working for you, enhancing your overall financial efficiency and wealth accumulation over time. While this calculator provides a simplified view, it powerfully demonstrates the potential financial advantage of controlling your own banking function.
Important Considerations:
This calculator provides an illustrative estimate based on the inputs provided. Actual policy performance, loan terms, and cash value growth can vary significantly based on the specific insurance company, policy design, and economic conditions. It is always recommended to consult with a qualified Infinite Banking practitioner or financial advisor to understand how this strategy can be tailored to your individual financial goals and circumstances.