What are vanishing premiums?

Vanishing premiums are a feature of some types of permanent life insurance policies, such as whole life or universal life. They are a marketing strategy designed to appeal to potential buyers by offering the possibility of the policy premiums "vanishing" or disappearing at some point in the future. The way this works is that the policyholder pays higher premiums during the early years of the policy to build up cash value within the policy. Once the cash value reaches a certain point, it is then used to pay the premiums, effectively "vanishing" them. The idea is that eventually, the policyholder will no longer have to pay premiums out of pocket, and the policy will essentially be "self-funding" from the cash value. However, it's important to note that vanishing premiums are not a guaranteed feature of these types of policies, and there are risks involved. For example, if the policyholder does not pay the higher initial premiums consistently or if the policy's cash value does not perform as projected, the vanishing premium feature may not materialize. Additionally, there may be tax implications for using the policy's cash value to pay premiums, depending on the specific details of the policy and the policyholder's individual circumstances. It's also worth noting that not all permanent life insurance policies offer vanishing premiums as a feature, and that potential buyers should carefully consider all aspects of a policy before making a decision.