Angie moved to Ogden, Utah. She always asks challenging questions about life insurance. “What are vanishing premiums?”

Answer to Readers Question: As I understand it, vanishing premiums are not legal to sell, mainly because they are not really vanishing.

The type of policy that was commonly utilized was a Traditional Whole Life policy. These insurance policies paid dividends and the dividends were essentially used to pay the future premiums if and only if they were large enough to cover the required cost of the iinsurance.

Because the dividend scale is not guaranteed, there was no way to guaranty that the premiums would “vanish”. These whole life policies are still very popular, and the ability for the dividends to be used to pay for future premium is still available as long as the policy is provided by a mutual company that pays dividends.

There are also limited payment whole life policies, which are designed to require premiums for a limited number of years, at which time they become paid up, and require no future premium payments. These policies tend to be very expensive.