Uses of Life Insurance

People buy life insurance for a variety of reasons:

  • Income replacement, which is especially important for younger couples with children, who want to provide income for survivors in the event of premature death.
  • Mortgage protection, to pay any balance due at death.
  • Buyout of a business partner’s interest from family members who inherited that interest.
  • Final Expenses, when other sources of cash may not be available.
  • Liquidity, particularly important in the case of large estate with assets like a private business when money is needed for taxes and other expenses.

With the passage of time these needs for life insurance may no longer exist. The children have grown and left home, the mortgage has been paid, significant investments have accumulated, and either the business has been sold or a transition plan developed.

If you are one of those with an insurance policy no longer needed for its original purpose, you might consider transferring ownership of it to our organization. You would receive a donation receipt for the value of the policy, which is normally approximately the cash value. If you have owned the policy for a long time, the value of the policy may be larger than your net cost. In that case, the gain would be taxed, but the tax credit would exceed the tax, resulting in tax savings.

If you continue paying premiums after transferring ownership to our organization, you would receive a donation receipt for your premium payments. This is true whether you pay those premiums directly to the insurance company, or make contributions to our organization, which we then use for the premiums.

If you prefer to retain ownership in case your circumstances should change and you need the cash value or proceeds from the policy, you could name our organization as beneficiary but not owner. Although you would not receive a current donation receipt, a receipt would be issued for proceeds we receive at the end of your life, and a tax credit could be claimed on your final income tax return.

A life insurance policy can be a great way to assure a future gift, perhaps for a named endowed fund, without affecting your current lifestyle.