Whole life insurance policies develop cash value. Cash value in a whole life insurance policy can be borrowed as a loan against the policy. That’s where the family bank comes in. In short, it’s a financial strategy that promotes:
First, funding whole life insurance policies to develop cash value; and second, borrowing money against your policies to:

• Payoff debt
• Payoff mortgages
• Finance business
• Finance cars
• Fund college
• Fund retirement

There are a number of reasons to use a family bank. Here are the top 5 reasons for using a “family bank”:

1. Protection, is critical for financial security. A family bank, which in reality is a whole life insurance policy, not only has policy cash value that the policy owner can use like a line of credit during their lifetime, but also provides a death benefit that gives a family financial protection.
2. Growth, is another important consideration when purchasing your family bank. A whole life policy provides a guaranteed return on premium monies. In addition to the guaranteed return, there is also the opportunity to earn dividends in a whole life insurance policy, if the policy is with a mutual life insurance company.
3. Access. Being able to access money to do any of the things listed above is critical to make the family bank strategy work. Other financial products are not as attractive as whole life insurance because access is more limited or penalized in many typical financial products.
4. No market risk. Using whole life insurance as your family bank eliminates the need to assume market risk because growth is already built into the policy and guaranteed.
5. Taxes. Last, but far from least, are the tax benefits of using whole life insurance as your family bank. First of all, policy loans which are the foundation for using the family bank strategy are tax free. Whole life insurance itself grows on a tax deferred basis. This means that as long as the money stays in the policy no taxes are due on the growth. In the case of withdrawal, money is taxed on a first in first out (FIFO) basis. This is ideal because the policy owner can withdraw everything they’ve paid in premiums (cost-basis) tax free. Policy dividends are also tax free up to cost-basis, and the policy death benefit is tax free to the heirs.