You may have heard of something called a “770 account” or perhaps “the president’s account,” “infinite banking,” or “be your own banker.” These terms are all names for a basic concept that involves using a permanent life insurance policy, usually whole life, as a savings vehicle, as opposed to one providing a death benefit for beneficiaries.

The 770 “account” isn’t actually an account at all; the name is derived from Internal Revenue Code section 7702, which, among other things, defines the tax treatment of life insurance contracts. The idea behind the so-called 770 account is to fund a permanent insurance policy to generate greater short-term gains than can be realized from a savings account.

This general concept is certainly attractive. Some investors are persuaded by the possible benefits of this strategy—or the sales pitch, which may sound something like, “It’s just as safe and accessible as your savings account. And you’ll enjoy better interest rates, tax advantages, and protection from creditors.”

If you’re thinking that this sounds too good to be true, you’re probably right.

Buyer beware 

The 770 account strategy rarely works as intended because life insurance policies are not designed for short-term growth and distribution. Policies usually earn interest and/or dividends—but, due to the way that policy costs are structured, you generally won’t see positive returns for a number of years after the policy is purchased. If you remove money too soon, the policy’s long-term growth may be significantly impacted. Also, if you contribute too much to the policy too quickly, the policy may become a Modified Endowment Contract (MEC), which negatively impacts the tax benefits of life insurance policies.

In addition, be sure to keep the following in mind:

  • The plan involves a permanent life insurance policy, usually whole life, which means that you may be required to take a medical exam and will need to qualify based on the insurance company’s underwriting requirements.
  • Policy performance may be tied to the financial strength of the insurance company.
  • Policies are often sold using illustrations, which usually include a variety of nonguaranteed elements, and the policy itself may perform differently from the illustration.
  • Income from these policies is often taken in the form of a loan. Because loan rates vary, you may end up paying a higher rate in the future than you would on a distribution today.
  • If loan balances become too large, the policy could lapse, and you could face a significant tax bill.

Due to the short-term nature of the 770 account strategy and the risks described above, we believe it is rarely appropriate. Nevertheless, each situation is different. We can help you explore various opportunities that may be a good fit with your financial situation and goals. 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.


To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

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Ted Athans (CA Insurance Lic 0C52870) is a financial advisor located at Douglas, Athans, and Associates, 15338 Central Ave, Chino, CA  91710. He offers securities and advisory services as a Registered Representative and an Investment Adviser Representative of Commonwealth Financial Network®, Member /, a Registered Investment Advisor. Fixed insurance products and services offered by Douglas, Athans, and Associates Wealth Management Group. He can be reached at 800-833-1446 or at . This communication is strictly intended for individual residing in the state of CA,CT,FL,NM,NY,OH,OR,WA,and WI. No offers may be made or accepted from any residents outside these states due to various state regulations and registration requirements regarding investment products and services.