Vanishing Premium Provision
What Does Vanishing Premium Provision Mean?
A vanishing premium provision is a clause in a life insurance policy that allows the policyholder to use dividends from the policy to pay for premiums. As time goes, dividends increase in amount and eventually may be enough to pay for the premium payments, which is where “vanishing premium” comes from.
It may also be known as a vanishing premium option.
Insuranceopedia Explains Vanishing Premium Provision
The benefit of vanishing premium provisions is that over time, a life insurance policyholder can save a significant amount of money on premiums. The catch is that it can take a long time of paying the premiums to get there. However, for people who intend to pay life insurance premiums for a long time, it can be worth their while. Vanishing premium provisions are a way for life insurance companies to attract longer term policyholders.