Jahde: Life Insurance itself is almost a four-letter word to some HNW individuals, and even financial advisors as well.  Some unfavorable pricing and product design features of traditional insurance products have led to these lingering feelings and attitudes. In many ways PPLI is an evolutionary vehicle structure that addresses many of these unfavorable experiences of the past. PPLI was consciously designed to provide a different client and advisor experience. In fact, no other insurance policy on earth has its particular flexible structure and ability to address family wealth needs and also client friendly pricing. But no matter, PPLI in many cases is not used simply because it is one-dimensionally seen as “insurance”, not as an advanced financial planning tool and investment strategy for HNW clients.

Mayes:  For investment advisors, this is a niche product and PPLI has many applications, if positioned properly. Our experience is that a focused education process with the advisor, using case studies and case design examples, illustrates the benefits very well. We then have another advocate.

Hortz: What was your motivation in building an insurance company that focused on private placement insurance products? 

Jahde: In my 30+-year private practice tax law career I represented many clients on life insurance issues primarily as to policy ownership choices, for example, irrevocable life insurance trusts versus other ownership choices. In the mid-1990s I became aware of a new approach to life insurance called PPLI which, being a tax lawyer intrigued me immensely as a planning tool for clients.  

The more I studied PPLI, the law and tax rulings, and attended whatever informational conferences were available, the more I realized the traditional life insurance purchasing formula needed a change. The old retail policy formula was: cheapest premium, highest death benefit, highly rated company, and a life policy that was illustrated to last the longest time prior to the policy lapsing.  Previously, very little investment element discussions occurred and in fact were avoided in the life insurance sales process.  

With traditional life insurance policies, rarely did the cash value equal the sum of premium payments made to the insurance company until maybe 10 to 15 years out after purchase of the policy (assuming interest assumptions that were used in the illustrations actually panned out – a rare event for traditional policies).  In view of such anemic cash values, life insurance as a cash value investment was not part of the sales process prior to the days of PPLI. The difference from traditional life insurance was that PPLI had a true investment component which was also a tax advantaged component, in addition to a death benefit. So from my perspective as an advisor to family wealth, I learned that PPLI was a much better way to buy life insurance.

Then the question became what carrier? However, back in the 1990s the choices of U.S. carriers were very limited and much of the private placement life insurance business was conducted offshore with offshore life insurance carriers, many located in Bermuda.

The substantial benefits of PPLI, yet the lack of awareness and choices, motivated me to build an insurance company that would have a focus on PPLI and other HNW solutions. We initially created a Bermuda life insurance company in 2001. Due to increasing regulatory pressures and with offshore businesses carrying some element of a stigma, it became apparent that a U.S. PPLI carrier could be a better business structure.  Therefore, we formed a South Dakota life insurance company and became an admitted licensed life insurance carrier in 2013. Such were the beginnings of Investors Preferred Life Insurance Company. Additionally, IPL at the time of licensure was able to enter into numerous reinsurance treaties with prominent reinsurers to cover the death benefit risk from policies it issued. Such treaties are often difficult to come by.

Hortz: What do you see and what are you working towards in evolving and further innovating the PPLI space

Jahde: Since IPL was created to address high net worth family wealth and the challenge of handling complex wealth management situations, we realized the need for advanced investment solutions. We are adding investment options constantly, and can work with qualified RIAs as subadvisors to the investor.  This realization and focus helps us lead the market in product and investment innovation, and offer one of the most flexible platforms in the industry.

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