Don't Forget About Life Insurance

Life insurance has long been and continues to be a source of great charitable gifts. But we don't often see a policy used to make a major gift, which is confounding, since there are many potential donors out there with fully paid-up policies. So the question is:

Why don't donors make gifts of their life insurance policies more frequently?

Primarily, there are three reasons: 

  1. Donors often overlook their life insurance policies as potential charitable gifts because they don't even consider them to be assets. Which they very much are.  
  2. When we meet with donor prospects, we just plain forget to mention life insurance as a possible source of a gift. 
  3. We're just not comfortable bringing up the subject with prospects because as we aren’t confident about the details of how to actually make the transfer of a policy to our organization.  

As for reason #3, the good news is that the process is as simple as changing the beneficiary of a retirement fund. All you need do is suggest to the donor that they contact their life insurance company and ask for the proper forms to effect the change of ownership and beneficiary

NOTE: This process may take a couple of weeks, so don’t wait to suggest it to your donor prospects, especially if they would like to consummate a gift before the end of the calendar year.

You'll recall from earlier discussion that the value of a gift of this type must be determined by a formal appraisal. (It's worth noting, however, that the value will most likely be very close to the cash value of the policy.) The life insurance company will be able to provide the names of qualified appraisers. To avoid any questions about undue influence, you should not be the one to contact the appraiser.

If you suggest making a gift of life insurance to your donors, you'll generate some great gifts from some of them, and you'll build your credibility with the others. 

Learn more about the finer points of making gifts of Life Insurance here, in the Gift Planning Field Guide