Wealthy investors, including family offices, are increasingly turning to private placement life insurance (PPLI) to increase the tax efficiency of their investments. PPLI enables wealthy investors to invest in hedge funds and other vehicles in a tax-efficient manner by providing access to tax-free accumulation and policy cash.
PPLI's roots lie in the development of variable universal life. Historically, life insurance has been divided into two types, term and continuous insurance, with term and life insurance products being the most traditional forms of coverage, and investments in these products being controlled by insurers. rice field. Only in the mid-20th century did life insurance and annuity products with DIY investment opportunities emerge. Index linked annuities, variable annuities and universal life insurance products offered policyholders the opportunity to earn higher returns by tracking stock indices and buying mutual funds within the policy. The investment potential of these products, combined with tax-deferred growth and tax-free real estate transfers, have made them attractive vehicles for retirement or estate planning, similar to 401(k) plans and IRAs.
This range of life insurance products includes Key Man and variable universal life insurance options. It offers the same benefits and follows the same regulations as Universal Life, except that the money from the premium can be invested in a variety of assets. PPLI is a form of mutable universal living.
PPLI only benefits the wealthy. Customer must be an eligible purchaser.
If an individual purchases, say, a private placement variable universal life policy with a death benefit of $20 million and an annual premium of $1 million, the airline secures a death benefit of $20 million. After paying taxes and premiums, the premiums are invested in a variety of alternative investment vehicles of the client's choosing. This asset is managed by a hedge fund or other wealth manager and grows tax-free in cash value accounts. Policyholders can take out loans to their Cash Value Accounts at the lowest interest rates whenever they want.