PPLI began to gain popularity after unveiling the Biden plans, according to which assets invested in the policy were tax-exempt. When the policyholder dies, the invested funds are returned to his heirs, also tax-free.
The policy implies that the risk of death of a certain individual (the policyholder and insured person may not coincide) is insured in a licensed insurance company. As a premium, property is contributed, cash or liquid assets, as well as business and even real estate.
The most important difference between the PPLI policy and other forms of life insurance is that the investment risk lies with the policyholder, and not with the insurance company. The PPLI policyholder can influence the choice of investment strategy for the optimal risk-reward ratio, as well as the choice of an independent asset manager and depository bank. In classical investment life insurance, the insurer is responsible for the result of the placement of funds and therefore must direct most of the money into instruments with guaranteed (low) returns. Therefore, the insurer offers only a limited set of funds to place part of the insurance premiums; sometimes this can lead to the situation when the portfolio income is not enough even to pay for the insurer’s services.
Both individuals and legal entities can be the PPLI policy beneficiaries.
Photos are from open sources.