PPLI for Accredited Investors: How Policy Wrappers Enable Alternative Asset Allocation

Private Placement Life Insurance (PPLI) has become a core tool for high-net-worth (HNW) and ultra-high-net-worth (UHNW) families in the United States who want to hold private equity, private credit, hedge funds, real assets and other alternatives inside a tax-efficient insurance wrapper. This article explains how PPLI works for accredited investors in the U.S. market (with emphasis on New York, California and Florida clients), the typical cost structure and provider landscape, and the practical steps and trade-offs when using PPLI to allocate to illiquid and unregistered alternatives.

What is PPLI — the policy wrapper explained

PPLI is a variable/universal life insurance policy sold under private placement rules to accredited and qualified purchasers. Rather than generic mutual funds, a PPLI contract commonly uses:

• Separate accounts or sub-accounts that hold a bespoke portfolio managed by the insured’s selected manager.
• Policy-level tax treatment that generally enables tax-deferral (and, in many cases, tax-free death benefit treatment) on inside investment growth, subject to IRC rules (e.g., Section 7702) and policy qualification tests.
• Contractual flexibility to hold alternative strategies that are otherwise difficult or costly to hold inside retail life products.

The legal and tax boundary points for PPLI come from life insurance statute and guidance (see 26 U.S.C. § 7702 for life insurance definitions) and the industry practice of structuring policies for accredited investors to maintain insurance tax treatment (source: Cornell Law and Investopedia). See more on the statutory framework here: https://www.law.cornell.edu/uscode/text/26/7702 and a practical overview: https://www.investopedia.com/terms/p/ppli.asp.

Why accredited investors use PPLI for alternatives (U.S. estate planning focus)

For HNW estate planning in the U.S., PPLI is attractive because it can:

• Provide tax-deferral or tax-free growth within the policy, reducing annual taxable events associated with partnership allocations, carried interest or ordinary income generated by alternatives.
• Facilitate estate tax planning by keeping growth inside a policy that can be structured as an irrevocable life insurance trust (ILIT) — removing appreciated alternative assets from the taxable estate.
• Improve privacy and reporting efficiency relative to direct fund holdings (though PPLI clients must still comply with FATCA/CRS and U.S. reporting).
• Allow economic exposure to illiquid assets (private equity, real estate, private credit) while preserving liquidity options such as policy loans and partial surrenders (subject to policy terms).
• Simplify succession by delivering death benefit proceeds to beneficiaries without the need to unwind complex fund positions at death.

For implementation, see practical design trade-offs in PPLI Policy Design: Minimum Premiums, Rider Options, and Liquidity Considerations.

Typical eligibility, minimums and provider pricing (U.S. market specifics)

PPLI is sold as a private placement to accredited or qualified purchasers. Typical onshore U.S. market characteristics:

• Minimum single premium: commonly $1 million to $5 million for onshore PPLI; many sponsors price attractively for $2M+ placements. Niche/offshore PPLI may have lower or higher thresholds depending on jurisdiction.
• Policy/wrapper fees (wrap fee): commonly 0.5%–1.5% of policy assets annually — covers administrative, custody oversight and policy servicing.
• External manager fees: negotiated with the selected manager; typical ranges are 0.5%–2.0% for separately managed accounts (SMAs) or akin to underlying fund fees for private funds (e.g., 1.0%–2.0% base fee; carry/performance fee may still apply depending on structure).
• Mortality/COI and expense charges: age- and underwriting-dependent; a representative range is 0.15%–0.6% annually for the mortality cost element on large policies (younger insureds pay less).
• Total annual drag: combined wrap + manager + mortality often falls between 1.2%–3.0% depending on manager and insured age.

Common names in the PPLI market (U.S. distribution and underwriting or global groups active in the U.S. client base) include Lombard International, Allianz Life, Jackson, and other major life insurers that support onshore policy wrappers or collaborate with specialty underwriters and PPLI structuring firms. Distribution and advisory work is often performed by multi-family offices, private banks and specialized insurance boutiques. Pricing and minimums vary by insurer and fiduciary arrangement; clients in New York City, Los Angeles, San Francisco and Miami commonly see minimums clustered at $2M–$5M for bespoke onshore wrappers.

Example (illustrative): a $5,000,000 single premium invested in alternatives returning 8% gross.

• Manager fee 1.5%, wrap 1.0%, COI 0.3% = total 2.8% annual cost
• Net annual return ≈ 8.0% − 2.8% = 5.2% (tax-deferred inside policy; death benefit remains income tax-free to beneficiaries if structured properly)

Custody, valuation and governance — due diligence matters

Accredited investors should conduct rigorous due diligence across three domains:

• Investment selection & governance:

  • Manager experience with illiquid strategies inside insurance wrappers
  • Alignment of incentives and fee negotiation for separately managed accounts
  • Operational due diligence and independent valuation protocols

• Custody & segregation:

  • Arm’s-length custody of policy assets (separate account custodian)
  • Clear documentation separating insurer capital from policy assets (avoid commingling)

• Compliance & reporting:

  • FATCA, CRS obligations and U.S. reporting rules; KYC/AML checks for family offices and private funds

See guidance on selecting and vetting counterparties: Selecting Managers and Underwriters for PPLI: Due Diligence for Sophisticated Investors and on custody/valuation separation: Separating Investment and Insurance: Custody, Valuation, and Governance in PPLI.

Comparison: PPLI vs direct alternative ownership vs traditional variable life

For a deeper cost/benefit comparison with traditional variable life, see: Comparing PPLI to Traditional Variable Life: Cost, Flexibility, and Estate Planning Outcomes.

Practical steps to implement (U.S. client workflow)

1. Confirm eligibility — accredited/qualified purchaser status and estate objectives (locations: NY, CA, FL have active adviser markets).
2. Engage advisors — tax counsel, life insurance structuring attorneys, and an investment manager experienced with PPLI.
3. Select insurer & underwriter — obtain quotes for wrap fees, mortality, riders, and minimums.
4. Design separate account — negotiate SMA terms, valuation frequency and custody arrangements.
5. Execute policy & fund assets — fund single premium; send legal documentation for ILIT or beneficiary designations if used.
6. Ongoing governance — quarterly NAV/valuation, compliance reporting (FATCA/beneficial owner rules), and periodic underwriting review.

Regulatory and reporting notes

PPLI clients and advisors must ensure compliance with FATCA, CRS (for cross-border families), know-your-customer (KYC) and U.S. anti-money-laundering rules. Structure and reporting requirements are covered in industry guidance; see: Structure and Compliance: FATCA, CRS, and Reporting for Private Placement Life Insurance.

Is PPLI right for your estate plan?

PPLI is best-suited to U.S.-based accredited investors who:

• Have meaningful allocations to alternatives (private equity, private credit, direct real estate, hedge funds)
• Need estate tax-efficient transfer mechanisms (ILIT combination)
• Can commit minimum premiums ($1M–$5M typical)
• Want focused governance and are willing to accept policy-level fees in exchange for tax efficiency and succession simplicity

Speak with a licensed life insurance underwriter and cross-border tax counsel for binding quotes and to model after-fee returns and estate outcomes in your residence state (NY, CA, FL, TX and other high-wealth states all have active advisory ecosystems).

References and further reading

• Investopedia — Private Placement Life Insurance (PPLI): https://www.investopedia.com/terms/p/ppli.asp
• 26 U.S.C. § 7702 — Definition of life insurance for tax purposes: https://www.law.cornell.edu/uscode/text/26/7702

Related articles

• PPLI Policy Design: Minimum Premiums, Rider Options, and Liquidity Considerations
• Selecting Managers and Underwriters for PPLI: Due Diligence for Sophisticated Investors
• Comparing PPLI to Traditional Variable Life: Cost, Flexibility, and Estate Planning Outcomes