IBC vs "Buy Term, Invest The Difference"
When you search for the pros and cons of the Infinite Banking Concept (IBC), you’ll almost always come across the phrase: “buy term and invest the difference.”
The argument goes like this: don’t bother with IBC or whole life. Just buy a cheap term policy and invest what you would have paid in premiums elsewhere. Sounds simple, right? Let’s dig deeper — because once you really understand it, you’ll see why IBC outperforms this approach over the long term, and still allows you to invest at the same time.
The First Criticism: “Whole Life is Too Expensive”
This is where the conversation usually starts. People tell me, “whole life insurance is a waste of money — term is way cheaper.”
Here’s the reality:
Term insurance is cheap because it rarely pays out. It’s built on probabilities. The insurer collects premiums knowing that only a fraction of policies will ever pay a death claim.
Term coverage is temporary. Once the term is over, so is your coverage. If you die after it expires, your family gets nothing.
Whole life, on the other hand, is permanent. As long as you pay your premiums, a death benefit is guaranteed.
So if what you’re really after is lifetime coverage and certainty, whole life is in a different league entirely.
The Second Criticism: “IBC Premiums Could Be Invested Instead”
Here’s what people miss: when you fund an IBC policy, you’re not just paying the base premium. A large portion of your payment buys paid-up additions (PUAs). These are little chunks of fully paid life insurance that add to both your death benefit and your cash value.
Why does this matter? Because your cash value is contractually guaranteed to equal your death benefit by age 100. That means it grows every single day. And every time you add PUAs, you increase the death benefit — which pushes your cash value higher too. Over time, this creates a snowball effect where your growth accelerates, especially later in life.
That’s something no term policy and outside investment combo can replicate.
What About “Buy Term and Invest the Difference”?
Let’s say you buy term to age 100. Technically, you’d be covered for life. But here’s the catch: you’ll almost never qualify for the same level of coverage you could get through IBC, and you’ll miss out on the cash value growth entirely.
Sure — let’s assume you actually invest the difference (and most people don’t). You might build a nice portfolio. But then you face two problems:
1. Access during your lifetime: To use those investments, you usually have to sell. That triggers capital gains tax and interrupts compounding.
2. Tax at death: Under Canadian law, when you die, your assets are deemed to have been sold. That means your estate faces a hefty tax bill — often wiping out a big chunk of the wealth you built.
So yes, you might invest the difference. But you’ll bleed money to taxes and lose control over how and when you can use it.
How IBC Flips the Script
With an IBC policy:
You can borrow up to 90% of your cash value anytime, no questions asked.
Loans are private in Canada and don’t show on credit reports.
You control the repayment schedule — you’re both the borrower and the banker.
Best of all, your cash value keeps compounding uninterrupted while you use the money.
At death, your beneficiaries receive the death benefit (minus any outstanding loans) tax-free.
The Numbers: Risk vs. Guarantees
The “buy term and invest the difference” crowd is really saying: you can make more money in the markets. And maybe you can. But let’s be honest: there’s no guarantee. You could also lose everything.
IBC is different. Growth is guaranteed by contract. And when a great investment opportunity comes along, you can leverage your policy with a loan to take advantage of it — without interrupting your growth.
Remember: IBC isn’t an investment. It’s a financial strategy that creates a safe, liquid pool of capital you control. That capital then supports all your other investments while reducing risk.
The Bottom Line
IBC gives you:
Greater long-term death benefit than term insurance ever could
A way to protect your wealth from the tax hit of deemed disposition at death
Guaranteed, compounding growth of your capital
Flexibility to invest when opportunities arise
It’s not “whole life or investing.” With IBC, you can have both: permanent coverage that grows and the freedom to invest your capital however you see fit.
When you become your own banker, it’s no longer about choosing one path over the other. It’s about building a system where you win on every front.
