Private Placement Life Insurance
Institutional Investments. Held Inside a Life Insurance Policy.
Private Placement Life Insurance (PPLI) is a customized variable life insurance policy offered through a private placement and available only to accredited investors and qualified purchasers. The policy’s cash value is invested in Insurance Dedicated Funds that follow institutional strategies such as hedge funds, private credit, and other alternatives. Investment returns accumulate inside the policy on a tax-deferred basis.
Begin a conversation →What PPLI does, and what it costs.
PPLI is a tax structure wrapped around investments you would otherwise hold in a taxable account. It is worth its cost only when the tax it removes is larger than the charges it adds.
Tax-inefficient returns compound without annual tax.
Hedge funds, private credit, and high-turnover strategies produce returns taxed each year as ordinary income or short-term gain. For a California resident in the top brackets, the combined federal and state rate on that income can exceed 50 percent. Inside a PPLI policy the same returns accumulate tax-deferred, and the death benefit generally passes to beneficiaries free of federal income tax under IRC §101(a).
- Returns accumulate tax-deferred inside the policy
- Policy loans are generally not taxable while the policy is in force and is not a Modified Endowment Contract
- Death benefit can be excluded from the taxable estate when a properly structured trust owns the policy
Several layers of charges, and less liquidity.
The policy carries a premium load, state premium tax, the carrier’s annual asset charge, and the cost of insurance. Fund managers charge their own fees separately. The underlying funds often have lockups and quarterly redemption schedules, so cash is not available on demand. PPLI is a variable product: cash value follows the performance of the funds and can decline.
- Carrier charges are negotiated and vary by case
- Access to cash depends on fund redemption terms
- Cash value is not guaranteed
PPLI fits investors who already hold tax-inefficient assets.
It is less suitable for clients who hold mostly long-term, low-turnover equity, where the existing tax treatment is already efficient.
- i. You hold hedge funds, private credit, or high-turnover strategies in taxable accounts and intend to keep those allocations for the long term.
- ii. You are an accredited investor and a qualified purchaser, which generally means $5 million or more in investments.
- iii. You can commit $1 million or more per year for several years without needing that money back on short notice.
- iv. You have estate planning counsel in place, or want the policy owned by a trust from the start.
Rules the policy has to follow, and what can go wrong.
The tax treatment depends on two federal rules being met for the life of the policy. Two practical risks sit alongside them.
Diversification
The investments inside the policy must satisfy the diversification requirements of IRC §817(h). A policy that fails them can have its income taxed currently.
Investor Control
The policyholder may not direct individual investments within the funds. If the IRS finds that the policyholder controls the investments, the policy’s income can be taxed to the policyholder each year.
Liquidity
Insurance Dedicated Funds often limit redemptions. A withdrawal or loan can take a quarter or longer to fund, and some strategies lock up capital for years.
Lapse With a Loan Outstanding
If the policy lapses or is surrendered while a loan is outstanding, the deferred gain becomes taxable in that year. The policy has to be monitored so charges and loans never outrun the cash value.
PPLI is a security under federal law. Placement is made through a securities-registered firm and a carrier that issues private placement policies. Remain coordinates the insurance design, carrier selection, and trust ownership with the client’s advisors. The securities-registered firm handles the offering and placement.
Common questions.
What is PPLI?
Private Placement Life Insurance is a customized variable life insurance policy offered through a private placement. The policy’s cash value is invested in Insurance Dedicated Funds that follow institutional strategies such as hedge funds and private credit, and the returns accumulate inside the policy on a tax-deferred basis.
Who can buy it?
PPLI is available only to accredited investors and qualified purchasers. A qualified purchaser is generally an individual with $5 million or more in investments.
What is the minimum?
Most designs call for a premium commitment of $1 million or more per year for several years. Below that level the fixed costs of the structure usually outweigh the tax benefit.
What does it cost?
The policy carries a premium load, state premium tax, the carrier’s annual asset charge, and the cost of insurance. The managers of the underlying funds charge their own fees separately. Carrier charges are negotiated case by case, and a proposal should show every layer in dollars.
How do I get money out?
Through withdrawals and policy loans. Loans are generally not taxable while the policy remains in force and is not a Modified Endowment Contract. Access also depends on the underlying funds, which often have lockups and quarterly redemption schedules.
Does Remain sell the policy?
PPLI is a security under federal law. A securities-registered firm handles the offering and placement. Remain coordinates the insurance design, carrier selection, and trust ownership with your advisors.
Find out whether PPLI fits your portfolio.
We start with what you hold in taxable accounts today and what it costs you in tax each year. If the numbers don’t support the structure, we’ll tell you.
This page is general information, not tax, legal, or investment advice, and is not an offer to sell any security. Please consult your own CPA and attorney before adopting any structure discussed here.