Vanishing Premium


DEFINITION of 'Vanishing Premium '

A type of periodic fee, paid in exchange for an insurance policy, that eventually disappears because the investment return earned by the cash value of the policy is sufficient to pay the fee. Vanishing premiums are a feature of some permanent life insurance policies. After the policyholder pays the policy premium for a number of years, the paid premiums earn enough money that the policy holder no longer has to pay premiums out of pocket.

BREAKING DOWN 'Vanishing Premium '

A common criticism of vanishing premium policies is that insurance salesman may mislead consumers regarding the number of years for which they will have to pay a premium before the policy begins to support itself. If the projected investment returns used in the insurance illustration turn out to be overly optimistic, the policyholder may have to pay premiums out of pocket for more years than expected.

  1. Earned Premium

    The amount of total premiums collected by an insurance company ...
  2. Unearned Premium

    The premium corresponding to the time period remaining on an ...
  3. Weekly Premium Insurance

    A type of financial protection where the payments that the insured ...
  4. Vanishing Premium Policy

    A vanishing premium policy is a form of participating whole life ...
  5. Level-Premium Insurance

    A type of term life insurance for which the premiums remain the ...
  6. Premium

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