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What do the terms "churning" and "vanishing premiums" mean?
Churning is when a life insurance agent convinces you take the cash value from your life insurance policy and use it to buy a new policy, which is often more expensive. What you're usually not told is that you're going to be back to square one in terms of cash-value accumulation.
The big incentive for an agent to churn a life insurance policy is the sales commission your new policy generates for him.
In a "vanishing premium" scheme, your agent promise that the policy's investment return on your cash value will be enough to pay the premiums on your policy, so premium payments should vanish — but they never do. Or they might tell you that your dividend can cover the premiums.
The problem with this is that no one can predict what kind of investment return the insurance company will experience.
For more information on churning and vanishing premiums, read anatomy of a misleading salespitch.
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