Using Life Insurance for Charitable Giving

Many people have causes they are passionate about, whether it is a non-profit institution, animal or human rights efforts, ending homelessness, or another mission that benefits society. Some of these causes represent personal experiences that donors would like to help resolve for future generations, such as giving to a cancer research fund after a loved one passes. Still, others are passionate about conservation and may donate money to save rainforests.

Donors may choose to allocate a portion of their income to support these charities through regular giving or by establishing a donor-advised fund that provides ongoing contributions at the donor’s discretion.

However, one of the less apparent vehicles worth considering for charitable efforts and leaving a legacy of giving is life insurance. Whether you have a term or whole life insurance policy, you can provide much-needed support to causes that make an impact on the greater good.

There are three primary ways that you can help charities benefit from life insurance policies:

List the charity as a beneficiary on your policy.

If you have an existing life insurance policy, you can list a charity as either a primary or contingent beneficiary of the death benefit. This way, you can arrange one beneficiary to receive 80% and the charity to receive 20% of your policy’s death benefit when they are both listed as primary beneficiaries.

Another option is to have a primary beneficiary, and the charity listed as a contingent beneficiary. This option enables you to prioritize the death benefit proceeds of your policy should you die at the same time as your primary beneficiary.

Purchase a new policy and designate the charity as the policy owner and beneficiary.

If no current life insurance policy exists, consider purchasing a brand-new policy. In addition, making the charity the policy owner and beneficiary. With this method, you can continue to pay the policy premiums through monthly donations to the charity. Upon your death, the charity will receive the lump sum of your death benefit.

Donate the cash dividends.

If you prefer to contribute money to a charity while you are still living, life insurance is a capable vehicle. Whole life insurance policies receive annual dividends from the company that issues the policy. As a policy owner, you can choose to receive these dividends as cash payments. You can also forward the dividend payments directly to the charity.

However, it is essential to note that the payment of annual dividends is not guaranteed. Annual dividends may vary in amount from year to year. Thus, it may not be best to rely on the dividends alone to fund recurring or annual charitable pledges.

Find out how life insurance fits into your overall financial goals.

Your financial professional can help you identify ways to fund your charitable giving goals.  And help keep your beneficiaries updated on your life insurance policies. They can also partner with your attorney to ensure your estate plan reflects your wishes. In addition, notify your attorney of any changes made to your beneficiary designations.

Disclosure: Guarantees are backed by the financial strength and claims-paying ability of the issuing company.

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