Private placement insurance products are comprised of private placement life insurance (PPLI) and private placement annuities (PPAs). These products maintain the same structure as traditional variable insurance products, including separate account protection, state regulated policy forms, and preferential tax treatment. PPLI is typically purchased as an investment accumulation vehicle, not for life insurance protection. The PPLI product does have a death benefit, but the amount of death benefit is generally reduced to the lowest possible amount while retaining the income tax benefits that are afforded life insurance products.
PPLI and PPAs provide benefits typically not available with traditional insurance products. At Peter M. Williams & Company we differentiate ourselves in a number of key ways:
- We charge no sales load, and there is no surrender charge
- Clients have access to institutional pricing and nontraditional investment managers
- We situs the products in South Dakota, where we have a turnkey operation that exponentially reduces cost and burden to the client
PPLI has the same tax benefits as other non-MEC cash value life insurance products. PPLI products have the following income tax benefits:
- Cash values accumulate income tax-free
- Cash values are available income tax-free using policy withdrawals and policy loans
- Death benefits are payable income tax-free
The PPLI income tax benefits are similar to the tax benefits provided by a Roth IRA. The main difference is that the PPLI funding has no restriction other than the amount of death benefit available in the re-insurance markets. It is important to note that if the policy were to be surrendered, there would be a taxable gain on cash values in excess of the policyowner’s basis.
PPLI and PPAs are exempt from registration under the Securities Act of 1933 and are not subject to regulation under the Investment Company Act of 1940. As a result, they may only be purchased by specific types of purchasers (i.e., Accredited Investors and Qualified Purchasers). Consequently, these products offer a unique insurance solution for a select marketplace.