Private Placement Life Insurance vs. Traditional Life Insurance
When it comes to securing your family’s financial future, life insurance is an important consideration. In the event of your death, life insurance policies can provide financial protection to your loved ones, ensuring that they are taken care of in your absence. However, not all life insurance policies are created equal. For high net worth individuals, a private placement life insurance (PPLI) policy can offer unique advantages over traditional life insurance policies. In this article, we’ll explore the differences between PPLI and traditional life insurance, and explain why PPLI may be the better choice for high net worth individuals & families.
Traditional life insurance policies operate in a relatively simple manner. Policyholders pay a premium in exchange for a death benefit that is paid out to their beneficiaries when the insured dies. After premiums are paid, insurance charges are deducted and the net premium is invested in some sort of mechanism, dictated by the policy type. In the case of traditional variable universal life (VUL), this net premium is invested in mutual funds. One of the main drawbacks of traditional VUL policies is that they limit investment choice to a pre-selected pool of options. As a result, traditional life insurance policies may not be an ideal option for qualified purchasers and/or accredited investors who are seeking to grow their wealth tax-efficiently and with more significant returns.
On the other hand, private placement life insurance (PPLI) policies are specifically designed for serving as a tax-efficient wrapper for tax-inefficient assets. PPLI policies operate in a similar manner to traditional life insurance policies. However, PPLI policies offer unique advantages over traditional life insurance policies. For instance, with a PPLI policy, the policyholder can invest in a separately managed account (SMA), which can be customized relative to the fixed menu of “off the shelf” offerings on the carrier’s platform. These SMAs can hold a range of investment types, including hedge funds, private equity, private credit, and real estate to name a few. This flexibility allows high net worth individuals to grow their wealth tax-efficiently and with more significant returns.
When comparing PPLI and traditional life insurance policies, the key differences lie in the investment flexibility, costs, and liquidity. Since life insurance policies grow tax-deferred, they trade off investment tax drag for insurance costs. PPLI policies are less expensive than traditional, publicly-offered life insurance because fees are very low, comparable to fees charged by asset managers. Additionally, while PPLI can be underwritten under the laws of the various U.S. states, non-U.S. PPLI is even less expensive due to lower tax-based costs imposed against the premiums.
EWP Financial, a company that specializes in Private Placement Life Insurance (PPLI), has been working with PPLI and EWP since their beginning. The founder and director of EWP Financial, Michael Malloy, has authored two books on PPLI, written hundreds of articles, and produced almost 100 videos on its YouTube channel, EWP Financial, all with the specific purpose of reaching out directly to wealthy families. EWP Financial markets itself directly to the world’s wealthiest families. This is because EWP Financial has carved for itself a niche with few competitors, and is very happy to have done so.
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