Bespoke PrivateRisk™ Policies: The Ultimate Ownership Structure for High Net-Worth Families and Individuals

Bradley A. Barros discusses the financial benefits of PPLI and the various benefits it offers on a consumer's portfolio

Wealth holders own permanent life insurance for a variety of reasons. The benefits typically include substantial tax benefits and asset protection.

But when wealth holders are asked what they dislike about life insurance they uniformly respond with a series of concerns:

  • They are shocked to learn that the commissions can exceed 125% of the first -year premium; 
  • They are frustrated with the limitations to invest in a handful of (often expense-laden) funds offered by the carrier; 
  • They feel taken advantage of by hidden internal fees and expenses that erode their policy cash value – the industry slang is “death by a thousand cuts”;
  • Older insureds feel robbed – and they are – when the internal Cost of Insurance (COI) for some policies unexpectedly skyrockets to unaffordable levels that were not properly disclosed at the time of the sale.

Time and time again we have seen policyholders left holding a bag of empty promises after paying premiums for decades.

We understand and share these frustrations. If you want to protect your family and better protect your business holdings and other investments, now is a good time to ask yourself the following question:

What if there were a way that you could enjoy all of the benefits and advantages of life insurance – but without the painful negatives that are commonly associated with it? 

The answer to this question is that there is a better way. Bespoke Private Placement Life Insurance™.

A Bespoke Private Risk policy is a variable life insurance policy wherein the menu of investments is not limited by the issuing life insurance company’s portfolio, thereby broadening the choices of cash value investments to an almost unlimited scope.

Bespoke Private Placement Life Insurance

Private Placement Life Insurance (PPLI, or “PrivateRisk Policies”) is an advanced form of life insurance that can provide substantial advantages to policy holders above and beyond the life insurance policies that are sold by agents to the general public. Qualifying Private Risk policies are treated by the IRS identically to retail life insurance policies. The insurance benefits, application of tax favored status, and governing rules that apply to retail life insurance is also afforded to traditional life Private Risk policies. 

As background, “a Private Placement Life Insurance (PPLI) policy is a type of variable life insurance policy. One of the chief tax benefits of a cash value life insurance policy is that the policy’s cash value accumulates free of income taxes.

The types of investments available in a retail or mass marketed variable life policy may include stocks, bonds, mutual funds, and alternative investments. However, the menu of available investments is nevertheless limited by the offerings of the issuing life insurance company. A Bespoke Private Risk policy is a variable life insurance policy wherein the menu of investments is not limited by the issuing life insurance company’s portfolio, thereby broadening the choices of cash value investments to an almost unlimited scope.

As an overview, curated policies that are designed using “best-practices” are often designed in the following manner:


  • An Insurance Dedicated Fund (“IDF”) holds the majority of the policy investment assets.  The IDF is a preferred vehicle to hold assets within a policy structure. Separately Managed Accounts (“SMA”), properly administered, are permissible.
  • The creation of the IDF and the manager you choose is client need driven.
  • Based upon performance and consultation with the insurance carrier.
  • Flexibility is built into the policy and the investment strategy, allowing changes when desired. 
  • The IDF or SMA are designed to achieve a diversified portfolio.
  • The portfolio will become more diversified over time as earned dividends are re-invested without deductions for taxes.
  • In addition, the manager can sell appreciated assets without capital gains exposure.  This would be done confidentially due to the policy asset protection.
  • The policy structure is designed to both protect assets and maintain anonymity.

Investing Through a Customized Private Placement Policy

  • Curated PPLI policies, and the contract structure and terms, are customized to suit the client, their needs, and their situation.
  • These policies can hold traditional bankable assets, as well as a variety of business interests in nearly any type of industry, commercial and residential investment real estate, intellectual property rights, music catalogues, artwork, oil and gas holdings, and other holdings as part of the Cash Value.
  • The policy Cash Value can be structured to grow tax advantaged, accessed tax-free through withdrawals and policy loans that do not need to be repaid during life, and tax-free death benefits
  • Policy holders may suggest their own trusted investment advisors to oversee and manage the policy cash value holdings, subject to communication with the PPLI insurance carrier, and investments may be held in custody at the selected investment manager’s firm.
  • There is complete transparency of costs on a pre-arranged term sheet. There are generally no commissions, only fully disclosed management fees charged by the PPLI Insurer, and the referring advisor is paid from the fee collected by the insurer.
  • The policies can be owned by trusts and other structures that are regulated by state law and provide valuable privacy and protection to policy owners and beneficiaries. 
  • The policy Death Benefit may be acquired at a much-lower net cost, versus mass-marketed and retail insurance policies.
  • Private Risk policies may distribute life insurance proceeds “in-kind”. In-kind assets can include the actual stock or ownership interests in private equity and real estate.

[To read more of Bradley Barros’s thought leadership click here]

Where Can You Find Customized Private Placement Policies?

It is critical to work with wealth advisors who hold a deep acumen and long-term experience in designing customized private placement structures. It’s also important to work with a fiduciary (who is legally obligated to place your interests first). There are myriads of fiduciary firms and many of them are outstanding. The following is one of the best descriptions I’ve seen in describing how to find the right fiduciary for PPLI planning:

As with any professional, there can be a wide range of competency. The most important criteria is to make sure the person/firm is NOT affiliated with a broker-dealer (and ask them to have this in writing). It is also critical to make sure your advisor does NOT offer any packaged funds in their PPLI product. Packaged funds can mean back-end fees and bias. Some firms create products/funds for investment firms and package them (in PPLI policies) as portfolio choices. In other words, you may find yourself paying a firm to advise you to buy their own products (or products in which they have a hidden commission or fee). Believe it or not, this can be done in the fiduciary world!

Life insurance agents are often Not Your Exclusive Fiduciaries – which means that they are under no legal duty to look out for your best interest, and they generally have little or no experience with PPLI (and have likely never heard of PPLI policies that are custom designed to own private equity). They generally have a duty to insurance companies.

Insurance brokers are similar to agents in that often have an allegiance to one or more marketing companies or reinsurers in order to generate sales, or they have commission requirements that can impact their recommendations. Sometimes the broker can mark-up the PPLI reinsurance costs without disclosing the mark-up to the client (in our experience we’ve seen this as high as 200%)! 

If an advisor is not acting as your legal fiduciary and/or does not disclose all forms of compensation in writing, you know his or her interest may be compromised.  

So where can you turn?

Whether you run a Fortune 500 company, are a unicorn investor or own a successful middle-market business, there are capable professionals who can help. You just need to know where to look. Depending on your circumstances, there are different paths from which to choose.

First, when contemplating the purchase of truly bespoke PPLI coverage, it’s best to turn to professional consultants and attorneys who specialize in custom crafted structuring. These experts do not get paid a commission. Instead, they charge fees that are fully disclosed in advance of a transaction. 

Work with a firm who is deeply professionally focused on customized PPLI. Don’t settle for an advisor who simply dabbles in this space. This is not an area of planning where you want to pay for someone’s learning curve. 

If you oversee a billion-dollar company, you should consider working with a national or global law firm that has a large client base of ultra-high net worth families using customized PPLI. Alternatively, professionals, real-estate holders and entrepreneurs may have a better experience working with a boutique consulting firm that has the requisite experience, knowledge and legal bench to develop curated policies on an efficient basis. 

[For more on Private Risk Capital’s approach to asset protection click here]


It is possible to own investments in a policy’s Insurance Dedicated Fund or Separately Managed Account that includes the same types of business holdings and publicly traded securities that would be owned outside the policy. The financial advantages of investment in these policies may include:

  • The flexibility to own a portion of nearly any type of investment inside of a diversified IRS compliant life insurance policy;
  • The opportunity for enhanced appreciation due to the avoidance of tax on all capital gains and investment income inside the policy;
  • The ability to access gains inside the policy on a tax-free basis; 
  • The ability to transfer assets “in-kind” to a successor generation;
  • The ability to transfer tax-free life insurance benefits at a notably lower net cost to loved ones.


1 § 72(e). Note that the policyholder will be required to recognize the taxable income and/or losses  deferred under § 72 upon the occurrence of any one of a number of events, including sale, surrender, or lapse of the policy. All statutory references made herein are to the Internal Revenue Code of 1986,  as amended (the “Code”), unless specified otherwise. 

  1. Contrast this use of the policy’s cash value with non-variable universal life insurance policies or whole life insurance policies, wherein the policy’s cash value is invested with the general account of the issuing insurance company. The general account of most major life insurance companies, especially the mutual companies, has historically performed well relative to the fixed-income investment markets. 
  2. 3 § 101(a)(1). Note that the death benefit may be rendered taxable in the event of a “transfer for value,” a prominent exception explained in § 101(a)(2) and the Treasury Regulations thereunder.
  3. For non-Modified Endowment (non-MEC) Contracts only. Non-MEC withdraws to basis are tax free. Loans may be obtained from the insurance policy on a tax-free basis. Clients should consult insurance counsel for further details. Certain advanced planning benefits that may be derived through a Private Risk policy can only be obtained through planning with expert counsel. 
  4. Tony Robbins – Money, Master the game.