Private Placement Life Insurance

Private placement life insurance, or PPLI, is a customized version of variable rate insurance not available to the general public.

PPLI policies are more often offered by banks, hedge fund managers, and niche insurance companies than by the big names in traditional insurance. PPLI is an exclusive club, with word spreading through seminars and other events restricted to the investing elite.

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Who Qualifies for a Private Placement Life Insurance Policy?

Generally, PPLI is offered only to “accredited” or “qualified” investors—those who have substantial investable assets.

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What Are the Tax Benefits of Universal Life Insurance?

All universal life insurance policies, private or public, offer important tax benefits for the policyholder, including:

  • tax-free growth of the cash value of the policy;
  • tax-free access to accumulated cash value via loans or withdrawals (note that loans and withdrawals can reduce the death benefit); and
  • tax-free passing along of wealth to heirs via the death benefit, provided the policy is established within a life insurance trust separate from the policyholder’s estate.
Tax Benefits - universal life insurance

Why Is Private Placement Insurance More Desirable Than Publicly Sold Policies?

Given that all variable universal life policies, including those offered to the general public, provide essentially the same tax benefits, you may be wondering why people are getting excited about this option. Here are just a few of the key advantages of private placement insurance:

1. Institutional Pricing

Because PPLI is sold only to people who are extremely likely to keep their policies up to date and retain them for the long term, providers are able to offer PPLI policyholders significantly lower premiums than the general public would pay for similar coverage.

2. Greater Choice in Investment Strategy

Since every policy is customized, individuals investing in PPLI can seek out providers whose investment strategies align well with their own financial goals. Often, the provider will offer the investor open-architecture, from which they can buy a wide range of assets through a discretionary fund manager.

3. Estate Planning

The capacity to manage the level of death duties and direct funds to heirs of your choice, which is not always possible in some countries.

5. Smooth Administration for your Tax and Trust advisers

Very often your tax and trust providers will offer discounted rates when you capital is invested through one of these “Tax Wrappers.”