What is Private Placement Life Insurance?

Private Placement Life Insurance: Financial security is of utmost importance to most people. The fear of not being able to provide for one’s family is a very real concern.

Life insurance can help provide the necessary financial support an individual has in mind for those he would like to insure and for the people who depend on him, such as his spouse and children. Learn more about what a life insurance policy is in this article.

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Private Placement Life Insurance
Private Placement Life Insurance

What is a private placement policy?

A private placement life insurance policy is a type of life insurance policy that is sold through an estate planning tool called an irrevocable trust. In order to be effective, such an insurance policy must be purchased and paid for using the proceeds of a decedent’s probate estate.

Under these circumstances, no other source of funds is available to purchase such a policy, and the legal obligation to pay these premiums remains with the estate.

The death benefit is paid directly to the beneficiaries of the trust upon the death of the insured. Since such a policy is purchased with combined assets, it can offer tax advantages not available in other types of life insurance policies.

Since no cash payments are made while the insured remains living and healthy, there is no premium after death and therefore no cash outlay from an estate to pay funeral bills and other final expenses.

The benefits of private placement life insurance are simply not available with a traditional life insurance policy.

How do I create a private placement account?

Did you know that only accredited investors have the ability to participate in a private placement? If you are looking to take advantage of investment opportunities outside of the stock market, setting up a private placement account is a way for you to do so. However, you will need to read the terms and conditions of a private placement document to ensure you understand what is involved.


Before investing in a private placement offering, it’s important that you understand how you are able to transact and the limitations of your investment.  If you plan on participating in multiple private placements and wish to make investments outside of the public markets, a holding company may be beneficial for your purchases.


There are three types of private placement:

  • Limited Offering – The minimum investment for a Limited Offering is typically $50,000. There is no maximum investment in this type of private placement.
  • General Offering – The minimum investment for a General Offering is typically $100,000. There is no maximum participation in this type of private placements.
  • Seed Financing – A Seed Financing involves a small company that needs to earn money to get its business off the ground.

Private Placement Life Insurance Disadvantages

An advisor analyzed the pros and cons of private placement life insurance, which is a form of permanent life insurance that may provide tax advantages to the insured. Private placement life insurance advantages include:

  • When the insurance proceeds are used to finance a business (personal service income) then a business loss is considered upon the death of the insured, so interest income is lost because of this.
  • Insurance proceeds can be invested in taxable accounts such as stocks and bonds, which may lower the financial resources available during retirement.
  • Requires federal income tax deduction – As many as two or three years after the death of an insured person.
  • Insurance proceeds are subject to federal estate tax.
  • A portion of the proceeds must be used to pay the premiums during the policy term.
  • The proceeds can only be used for qualified heirs, so not everyone can receive this money.
  • Taxable as long as it is in an insured person’s taxable account, even if all premiums are paid during a stretch of time when the insured is not working.
  • Lack of liquidity to pay off debt because there is no current market for private placement life insurance.
  • -It may not be available for some occupations such as teachers, doctors, nurses and others.
  • There is normally a conversion period before the policy can be changed into a whole life policy and receive the death benefit. This can happen before guaranteed insurability.
  • A possibility of losing cash value if premiums are not paid or interest rates are low during the early years of the policy (before age 60).

Can you put real estate in a PPLI?

Yes, you can put real estate in a PPLI (Private Placement Life Insurance), but it depends on country policies.


We hope you enjoyed our blog on the importance of financial security. Most people who have financial security are happy to have it. Hopefully, the advice in this blog post will help you to ensure that you, your family, and your friends are all financially secure.

Please contact us anytime if you have any further questions or concerns by visiting answermeall.com/contact. Thank you for reading, we would love to hear from you again soon!

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