Reference
PPLI Glossary
Plain-English definitions of the terms that come up most often in Private Placement Life Insurance conversations — from §7702 and §817(h) to Insurance Dedicated Funds, MEC status, investor control, and frozen cash value policies.
PPLI (Private Placement Life Insurance)
A privately negotiated variable universal life insurance contract offered only to Accredited Investors and Qualified Purchasers.
Definition →TermInsurance Dedicated Fund (IDF)
A pooled fund created specifically to sit inside variable insurance contracts and satisfy §817(h) diversification.
Definition →TermModified Endowment Contract (MEC)
A life insurance contract that fails the §7702A seven-pay test, losing tax-free access to cash value during life.
Definition →TermNon-MEC Design
A PPLI policy funded within the §7702A seven-pay limits so lifetime loans and withdrawals stay tax-favored.
Definition →TermDEFRA
The Deficit Reduction Act of 1984, which enacted §7702 and defined life insurance for federal tax purposes.
Definition →TermTAMRA
The Technical and Miscellaneous Revenue Act of 1988, which enacted §7702A and the seven-pay MEC test.
Definition →TermIRC §7702
The federal tax definition of a life insurance contract — the gateway to all life-insurance tax benefits.
Definition →TermIRC §7702A
The Modified Endowment Contract rules — the seven-pay test that governs whether a policy is a MEC.
Definition →TermIRC §817(h)
The diversification requirement for variable insurance separate accounts.
Definition →TermInvestor Control Doctrine
The IRS doctrine that treats the policy owner as tax owner of separate-account assets when they exercise too much investment discretion.
Definition →TermAccredited Investor
An investor qualification under SEC Regulation D that gates access to private securities offerings.
Definition →TermQualified Purchaser
A higher wealth threshold under the Investment Company Act — generally $5M+ in investments — required for §3(c)(7) funds and most PPLI.
Definition →TermDiversification Requirement
The §817(h) test that limits concentration in a variable insurance separate account.
Definition →TermSeparate Account
The insurance-company sub-account whose investment results flow directly to the policy's cash value.
Definition →TermCash Value
The investment portion of a life insurance policy that grows tax-deferred inside the wrapper.
Definition →TermGPT / CVAT
The two §7702 tests a life insurance contract can use to qualify.
Definition →Term1035 Exchange
A tax-free exchange of one life insurance policy for another under IRC §1035.
Definition →TermDAC Tax
The Deferred Acquisition Cost tax carriers embed in policy pricing under §848.
Definition →TermFrozen Cash Value Policy
A PPLI variant designed so that the policy's cash surrender value is deliberately minimized, often for gift, estate, and reporting purposes.
Definition →TermTrust-Owned PPLI
A PPLI policy owned by a properly designed irrevocable trust so the death benefit passes outside the taxable estate.
Definition →