Vanishing Premium

Published: | Updated: December 21, 2017

Definition - What does Vanishing Premium mean?

A vanishing premium is an insurance premium that a policyholder has to pay initially but will eventually cease to pay because the policy begins generating sufficient funds to pay the premiums. This type of premium is commonly used in whole-life insurance policies. The insurance policy becomes self-sustaining after the premium has vanished.

Insuranceopedia explains Vanishing Premium

Many life insurance purchasers view vanishing premiums as desirable. Before the policy becomes self-sufficient, however, the investments made with the life insurance have to succeed and grow, which can take a very long time. Vanishing premiums typically have to be paid for many years before they go down to zero. Vanishing premiums are an alternative to regular premiums, which are premiums that must be paid periodically and do not vanish.

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