Donating a Life Insurance Policy to Charity

Donating a Life Insurance Policy to Charity

We invest in life insurance because we love our family and want to protect them. The right policy can ensure that our loved ones have the financial stability they need at a time when they need it most. But, what if we no longer have a need for that policy or, if there are no heirs to name as beneficiary?

Just as your life policy can provide security for your family, it can also provide security for your favorite charitable organization or your alma mater.

Donating a life insurance policy to a charity or college makes is easier for people to make a larger contribution than with an outright cash or property donation.  A life policy also allows your money to grow tax free, and typically the death benefits are transferred to the beneficiary tax free as well. However, keep in mind that insurance is not available in unlimited amounts.

Before making a decision on what to do with your policy in regards to charitable donations, consider the following:

  1. Determine your estate planning needs. Make sure this plan meets your current financial needs and can provide properly for your heirs and/or the charity or college of your choice.
  2. In order to write a life policy, you will need to undergo the qualification process, including both medical and financial underwriting.
  3. The type of insurance you choose is very important. Term life policies have a beginning and an end, meaning that if the donor lives past the designated end of term date, then the charity will receive nothing. Permanent life policies (whole life insurance or universal life insurance) are a better option when it comes to making a charitable donation.
  4. Decide whether you want to name the charity or college as a beneficiary or transfer ownership over to it completely. Once ownership of the policy is transferred to the charity or college, the decision is final.

For more information on donating a life insurance policy contact McGrath Insurance Group at 800-342-3859 or visit our website at

*This article is written for informational purposes only and should not be construed as providing legal advice.