Vanishing Premium Policy

DEFINITION of 'Vanishing Premium Policy'

A vanishing premium policy is a form of participating whole life insurance where the policyholder can use the dividends from the policy to pay the premium. Over time, the dividends will increase to the point that they cover the entire cost of the premiums.

BREAKING DOWN 'Vanishing Premium Policy'

When properly constructed, vanishing premium policies can be very attractive to consumers who are worried about longer term fluctuations in income, such as the self-employed, people who wish to start a business or people who wish to retire early.

RELATED TERMS
  1. Vanishing Premium

    A type of periodic fee, paid in exchange for an insurance policy, ...
  2. Premium Balance

    The amount of premium that is owed to an insurer for a policy, ...
  3. Automatic Premium Loan

    An insurance policy provision that allows the insurer to deduct ...
  4. Developed Premium

    A premium based on estimates of a policyholder’s risk profile ...
  5. Earned Premium

    The amount of total premiums collected by an insurance company ...
  6. Developed To Net Premiums Earned

    The ratio of developed premiums to net premiums earned over a ...
Related Articles
  1. Personal Finance

    Dividend-Paying Whole Life Insurance: What to Know

    Many whole life insurance policies pay dividends. Here are what policyholders need to consider.
  2. Retirement

    Understanding Life Insurance Premiums

    When buying permanent life insurance, what amount of premium should you pay for the coverage?
  3. Personal Finance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  4. Personal Finance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  5. Financial Advisor

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  6. Retirement

    Rate Increases

    If you’ve read any news stories about long-term care insurance in the last few years, you’ve probably read horror stories about astronomical premium increases that left consumers ...
  7. Personal Finance

    How Whole Life Insurance Works

    Whole life insurance combines insurance and an investment component for policyholders.
  8. Personal Finance

    Understanding Different Types of Life Insurance

    Understand the various types of life insurance, how each can be used in personal or business financial planning, and for whom they are best-suited.
  9. Personal Finance

    5 Ways to Lower Life Insurance Premiums

    Learn several effective methods for lowering life insurance premiums. These include quitting smoking and considering term life insurance.
  10. Markets

    Explaining Premiums

    Premium has a few different meanings in the financial world.
RELATED FAQS
  1. I cashed in my whole life policy, do I have to pay income tax on that amount?

  2. How do I calculate insurance premium tax?

    Find out how your health insurance premiums can affect your income taxes, including when you may be able to deduct premium ... Read Answer >>
  3. How can premium financing of life insurance help high net worth individuals (HNWI)?

    Discover the various benefits that premium financing of life insurance policies might enable high-net-worth individuals to ... Read Answer >>
  4. Why is my insurance premium so high/low?

    Insurance premiums can be affected by many factors including: type and amount of risk size of deductible amount of coverage ... Read Answer >>
  5. How does adverse selection affect insurance premiums?

    Find out what causes adverse selection in the insurance market and why it drives up premiums for all policyholders. Read Answer >>
  6. How is my insurance premium calculated?

    An insurance premium is the money charged by insurance companies for coverage. Insurance premiums for services differ from ... Read Answer >>
Trading Center