Private Placement Life Insurance (PPLI) is a variable universal life contract in which retail markups have been eliminated and the policy owners are permitted to name one of many investment managers to manage separate investment accounts, subject to due diligence by the insurance companies, with special attention to investor control issues.
Life insurance that qualifies under Section 7702 of the Internal Revenue Code may offer more tax- free death benefits and tax-free cash buildup. Because of the higher premiums required to implement a PPLI policy, the appeal has been embraced by wealthy individuals and corporations.
The PPLI can work in many estate planning and corporate applications. Younger people with longer life expectancy are especially attractive candidates.
The process includes traditional life insurance underwriting, due diligence of investment advisors, insurance acceptance of investment advisors, and initiating the policies in States that have lower premium taxes.
It is time consuming for both the professional agent and the client’s investment managers, the risks include less-than-expected investment returns, no premium or mortality charge guarantees, versus traditional policies that can provide those guarantees.
Before considering a PPLI or a traditional life insurance policy, a holistic look at the client’s needs should be undertaken.
Kagan has worked with clients in both PPLI and traditional life insurance for decades.
Private Placement Life Insurance Primer: Or Why Estate Planners Need to Understand Things Like Facultative Reinsurance by Richard Kagan & Jon Gallo © 2011
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