Private Placement VUL

Lombard’s Private Placement VUL is a wealth planning tool used by UHNW individuals, RIAs and family offices to invest in a tax efficient manner and transfer wealth to future generations more effectively.

The Market

Sales of VULs continued to increase from 2018 to 2019¹. The biggest driver of growth for VULs stemmed from protection-focused consumers, with new premium growing 23% compared to a 10% decrease in accumulation products. In Q2 of 2019, VULs held a 6% market share of total individual life insurance, due in part to investor concern with rising volatility and the specialized usage of VULs.

Why DPL Likes the Private Placement VUL

Lombard’s Private Placement VUL, designed for qualified purchasers, offers tax-deferred access to non-traditional investments (private alternatives), which can later be used to generate income or transfer wealth tax-efficiently. Clients can choose from 40-act mutual funds and even create their own variable insurance trust fund with appropriate asset levels.

How to Think About Commission-Free VULs

Private Placement Life Insurance (PPLI) is similar to traditional retail products supported by a segregated asset account (separate account). The PPLI contract makes available various investment fund options (referred to as “insurance dedicated funds”) in the case of private investment funds, “variable insurance trusts” in the case of registered funds or “separately managed accounts” (SMA), managed by the investment manager. The contract owner’s separate account value varies over time with the investment performance of the investments to which contract premium is allocated.

When your client needs:

LIFE INSURANCE: Clients who wish to create a long-term death benefit and lean on their RIA to manage additional cash value will be attracted to the VUL. Although VULs carry market risk, they can allow for the purchase of higher death benefits due to higher potential returns. The flexibility of the VUL also allows the client to make changes to their premium, access their cash value, or change their death benefit value and structure.

LEGACY PLANNING: VULs are attractive options to help clients with legacy planning needs or estate tax concerns. VULs can provide numerous tax benefits during the client’s lifetime, along with the tax-free transfer of assets at death, which is not available with most strategies.

TAX-FREE INCOME: Commission-free VULs allow for some of the highest cash value accumulation opportunities due to the lack of commission and variable structure. The FIFO treatment on withdrawals allows clients to create a potential tax-advantaged cash flow, critical for high net worth clients as well as clients under 59.5 who generally are not able to pull from qualified assets.