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 generated by the policy to cover premium payments. Over time, as dividends grow, they may eventually become sufficient to fully cover the premiums, leading to the term “vanishing premium.”

This provision is also referred to as a vanishing premium option.

Insuranceopedia Explains Vanishing Premium Provision

The primary benefit of vanishing premium provisions is that, over time, a life insurance policyholder can save a substantial amount on premium payments. However, it typically requires paying premiums for an extended period before reaching that point. For individuals planning to maintain their life insurance policies long-term, this feature can be highly advantageous. Vanishing premium provisions also serve as a strategy for life insurance companies to attract and retain long-term policyholders.