People often ask whether whole life insurance and infinite banking are the same thing. They aren't. One is a financial product, while the other is a strategy that uses that product. In most cases, you can't implement infinite banking without whole life insurance, but understanding the difference will help you avoid a lot of misleading sales pitches.

Whole Life Insurance Is the Container, Not the Strategy

Whole life insurance is a type of permanent life insurance. Like any life insurance policy, it pays a death benefit to your beneficiaries. Unlike term insurance, however, it also builds cash value over time at a guaranteed minimum rate that isn't tied directly to market performance.

That cash value is what makes the policy useful during your lifetime. Depending on how it's designed, you can borrow against it and, in some cases, make withdrawals.

Term life insurance works differently. It provides protection for a fixed period but doesn't accumulate cash value. That's one of the rea...