One of the most overlooked costs in

Private Placement Life Insurance (PPLI) is:

👉 Premium tax.

And depending on the jurisdiction, the difference can be substantial.

⚖️ 1️⃣ What Is Premium Tax?

Premium tax is a charge imposed on:

• Insurance premiums paid into a policy

In the PPLI context:

• It can materially affect:

Policy efficiency
Long-term returns
Net funding costs

📊 2️⃣ Premium Tax Rates Vary Widely

Across jurisdictions, premium tax may range from:

• 0%

• More than 3.5% of premiums

👉 The rate depends on several factors.

🌍 3️⃣ Key Factors That Determine the Rate

🏦 A) Insurer’s Domicile

The jurisdiction where the insurance carrier is based can significantly influence:

• Applicable premium taxes

• Regulatory treatment

• Cost structure

🇺🇸 B) U.S. State Rules

For domestic U.S. PPLI:

• State-level insurance taxes often apply

Some states impose:

• Higher premium taxes

while others offer:

• More competitive rates to attract insurance business

🌐 C) Policyholder Residency

In some structures:

• The residence of the policyholder may also impact:

Tax treatment
Applicable premium tax obligations

🏝️ 4️⃣ Offshore vs Domestic PPLI

🌍 Offshore Jurisdictions

Offshore PPLI structures generally feature:

✅ Lower premium taxes

✅ Reduced insurance-related costs

✅ More flexible structuring

🇺🇸 Domestic U.S. Policies

Domestic policies may face:

⚠️ State premium taxes

⚠️ Additional regulatory costs

⚠️ Potential DAC tax exposure under the

Internal Revenue Code

🧠 5️⃣ Why Some U.S. States Compete

Certain states have introduced:

• Lower premium tax regimes

to attract:

• Insurance carriers

• High-net-worth policyholders

• PPLI business activity

👉 This creates competitive differences even within the U.S.

⚠️ 6️⃣ Why Premium Tax Matters Long-Term

Even small percentage differences can become significant because:

• PPLI policies are often:

Large
Long-duration
Multi-million-dollar structures

👉 Over time, premium tax drag can materially affect performance.

📄 7️⃣ Planning Considerations

Effective planning often evaluates:

• Jurisdiction of the carrier

• Policyholder residence

• Regulatory environment

• Long-term administrative costs

🎯 Key Takeaway

Premium tax in PPLI can vary dramatically depending on:

• Jurisdiction

• State law

• Insurer domicile

• Policyholder residency

In practice:

Two policies with identical investments can produce very different outcomes simply because they are issued in different jurisdictions.