The concept, vanishing premium whole life insurance, used to be quite popular from the salesman’s point of view.
It has turned out that this idea is not only unrealistic but projecting life insurance policy values in the manner is tantamount to fraud.
Every life insurance agent knows that life insurance dividends are not guaranteed.
They learn that when they apply for their life insurance license and when they go through the study course that the life insurance company provides…
Vanishing Premium Whole Life Insurance
There is always some smart agent who checks the cash value and dividend structure of a life insurance policy and discovers that if the company continues their present level of performance the life insurance policy would be fully paid up in a limited period of years.
The death benefit of the policy is maintained. The vanishing premium ordinary life insurance policy is reborn.
The problem with this idea is that the life insurance company cannot guarantee it’s performance level 10, 15 or 20 years down the line. Their investment strategy might not prove as profitable as expected and their expenses may turn out to be above anticipated levels.
If this occurs and they projected a vanishing premium ordinary life insurance policy to be paid up in 17 years for example they are in big trouble with the authorities…
There are life insurance companies that perform so well that when you get to a certain point your policy has accumulated so much value that you can request to have the policy fully paid up at that point. You could hold a possible vanishing premium whole life policy.
They, the life insurance company, however, cannot tell you that it will happen…even if their projections are very conservative.
One of the great performers in the life insurance industry recently did that and because they were unable to fulfill their obligation to their policy owners ended up in the courts and lost.
The vanishing premium whole life insurance policy is a great idea, in theory, but projecting it as such is at the least unethical and, as it has been proven, illegal.