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. Premium Balance

    The amount of premium that is owed to an insurer for a policy, ...
  2. Earned Premium

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

    The ratio of developed premiums to net premiums earned over a ...
  4. Net Premiums Written

    The sum of premiums written by an insurance company over the ...
  5. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
  6. Guaranteed Cost Premium

    Premiums charged for an insurance policy that are not adjusted ...
Related Articles
  1. Insurance

    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.
  2. Insurance

    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.
  3. Retirement

    How Whole Life Insurance Works

    Whole life insurance combines insurance and an investment component for policyholders.
  4. Insurance

    The Basics of Premium Financing for Life Insurance

    Here's a look at the role premium financing plays in life insurance and how it works.
  5. Financial Advisor

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  6. Personal Finance

    The Best Life Insurance for Military Families

    Two of the most common types of life insurance are term and whole life. Here's why the latter isn't a good idea for most military families.
  7. Insurance

    What's Universal Life Insurance?

    Universal life insurance is permanent life insurance that offers a savings element.
  8. Retirement

    Beware the Sneaky Math of Universal Life Insurance

    Universal life insurance's cash value can be a cash cow – if there's any left. Read on to see if it'll work as an income source after you've retired.
  9. Financial Advisor

    Which Life Insurance is Right For You?

    Consumers have choices when it comes to life insurance. Knowing your future needs for cash or retirement can make the difference in what you select.
Hot Definitions
  1. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  2. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  5. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  6. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
Trading Center