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.

  1. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  2. Premium

    1. The total cost of an option. 2. The difference between the ...
  3. Participating Policy

    An insurance contract that pays dividends to the policy holder. ...
  4. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  5. Crowding Out Effect

    An economic theory stipulating that rises in public sector spending ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the ...
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