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Vanishing Premium

What is '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.

Explaining '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.


Further Reading


The law and economics of vanishing premium insurance
heinonline.org [PDF]
… The point in time when the premium is said to have "vanished" as reflected in … evidence rule, 38Jorden & Black, supra note 32, at 262 (noting that vanishing premium claims allege … of the insurance contract which was then breached when premiums did not vanish according to …

The external finance premium and the macroeconomy: US post-WWII evidenceThe external finance premium and the macroeconomy: US post-WWII evidence
www.sciencedirect.com [PDF]
… The point in time when the premium is said to have "vanished" as reflected in … evidence rule, 38Jorden & Black, supra note 32, at 262 (noting that vanishing premium claims allege … of the insurance contract which was then breached when premiums did not vanish according to …

Contemporary Real Estate Financing Technqiues: A Dialogue on Vanishing SimplicityContemporary Real Estate Financing Technqiues: A Dialogue on Vanishing Simplicity
heinonline.org [PDF]
… The point in time when the premium is said to have "vanished" as reflected in … evidence rule, 38Jorden & Black, supra note 32, at 262 (noting that vanishing premium claims allege … of the insurance contract which was then breached when premiums did not vanish according to …

NAFTA's Financial Convergence: Measurement by Dynamic Moment Analysis of Daily FX Forward Term PremiumsNAFTA's Financial Convergence: Measurement by Dynamic Moment Analysis of Daily FX Forward Term Premiums
papers.ssrn.com [PDF]
… The point in time when the premium is said to have "vanished" as reflected in … evidence rule, 38Jorden & Black, supra note 32, at 262 (noting that vanishing premium claims allege … of the insurance contract which was then breached when premiums did not vanish according to …

Market distress and vanishing liquidity: anatomy and policy optionsMarket distress and vanishing liquidity: anatomy and policy options
papers.ssrn.com [PDF]
… The point in time when the premium is said to have "vanished" as reflected in … evidence rule, 38Jorden & Black, supra note 32, at 262 (noting that vanishing premium claims allege … of the insurance contract which was then breached when premiums did not vanish according to …

Verifiability and the vanishing intermediate exchange rate regimeVerifiability and the vanishing intermediate exchange rate regime
www.nber.org [PDF]
… The point in time when the premium is said to have "vanished" as reflected in … evidence rule, 38Jorden & Black, supra note 32, at 262 (noting that vanishing premium claims allege … of the insurance contract which was then breached when premiums did not vanish according to …

Vexing Problem of Reliance in Consumer Class ActionsVexing Problem of Reliance in Consumer Class Actions
heinonline.org [PDF]
… The point in time when the premium is said to have "vanished" as reflected in … evidence rule, 38Jorden & Black, supra note 32, at 262 (noting that vanishing premium claims allege … of the insurance contract which was then breached when premiums did not vanish according to …



Q&A About Vanishing Premium


What does the fee eventually disappear because of?

The fee disappears because the investment return earned by the cash value of the policy is sufficient to pay it.

What is a type of periodic fee?

A type of periodic fee is a fee paid in exchange for an insurance policy.

What can be a common criticism of vanishing premium policies?

If projected investment returns used in the insurance illustration turn out to be overly optimistic, then consumers may have to pay premiums out of pocket for more years than expected.

Are vanishing premiums found on all permanent life insurance policies?

No, vanishing premiums are only found on some permanent life insurance policies.