Vanishing Premium Policy

AAA

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.

INVESTOPEDIA EXPLAINS '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

    1. The total cost of an option. 2. The difference between the ...
  2. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  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. Exposure Trigger

    An event that causes a policyholder’s insurance coverage to kick ...
  6. Beach Plan

    Property insurance for coastal property owners who have a high ...
RELATED FAQS
  1. What are the restrictions for naming a given individual as my contingent beneficiary?

    Life insurance is an important part of estate planning. It allows you to ensure that you can financially take care of the ... Read Full Answer >>
  2. What debt/equity ratio is typical for companies in the insurance sector?

    The debt-to-equity ratio is calculated by dividing total liabilities by total equity, and it is used to measure leverage. ... Read Full Answer >>
  3. How does the risk of investing in the insurance sector compare to the broader market?

    Due to economic, demographic and interest rate trends, there is less risk when investing in the insurance sector compared ... Read Full Answer >>
  4. What is the main business model for insurance companies?

    Insurance companies base their business models around assuming and diversifying risk. The essential insurance model involves ... Read Full Answer >>
  5. What economic indicators are important to monitor when investing in the insurance ...

    Inflation and interest rates are the best economic indicators to monitor when investing in the insurance sector. Unlike with ... Read Full Answer >>
  6. Who are Berkshire Hathaway's (BRK.A) main competitors?

    Led by renowned investor Warren Buffett, Berkshire Hathaway (BRK.A) is involved with multiple sectors of industry, facing ... Read Full Answer >>
Related Articles
  1. Insurance

    Top 10 Life Insurance Myths

    The most difficult aspect of this complex product is determining how much coverage you need and why.
  2. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  3. Home & Auto

    Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  4. Insurance

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  5. Professionals

    Indexed Universal Life Policies: Watch These Risks

    By properly vetting indexed universal life policies, advisors and savers can avoid contracts that could prove overly costly over the long run.
  6. Professionals

    Obamacare: Can it Be Repealed?

    Attempting to repeal Obamacare is a yearly ritual for House Republicans, but trying again in 2016 or beyond could create more problems than it solves.
  7. Professionals

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  8. Insurance

    India's Two-Child Policy

    As of 2014, 11 Indian states have passed laws to restrict Indian citizens from having no more than two children.
  9. Economics

    What Does Asymmetric Information Mean?

    Asymmetric information describes a situation where one party in a transaction knows more than the other.
  10. Fundamental Analysis

    How to Calculate a Combined Ratio

    Combined ratio is a formula used in the insurance industry to measure the performance of an insurance company.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center