Term Life Insurance – Leaving Your Benefits to a Charity

A beneficiary is the designated recipient of the proceeds of your life insurance benefits. Your policy can be designated to a single beneficiary or have multiple beneficiaries. Life insurance beneficiaries are typically spouses, children or grandchildren. A life insurance company is obligated to issue death benefits to the person listed as the beneficiary listed on your life insurance policy. It is therefore extremely important that you update this information if there are changes in your life that would require you to change beneficiaries. For instance, if you re-marry, the name of your new wife must be incorporated on the policy itself. Changing beneficiaries is easy to do and you can talk to your life insurance company directly about how to change the beneficiary on your life insurance policy.

Leaving an inheritance through a life insurance policy is traditional. But suppose your family has all the money they need? Suppose they really don’t need the death benefits and you want to consider leaving your death benefits to your favorite charity? You figure that would be your contribution to make this world a better place to live in for posterity.

It is a little unconventional but it can be extremely rewarding and satisfying to leave behind a substantial donation to your local charity, social service organization or even to your local church. But before you consider changing your beneficiary, make sure your family no longer depends on your financial support and is well-cared for in terms of finances. Charity does begin at home and it’s important to take care of your family’s financial needs before you think of leaving your life insurance proceeds to better the world.

Benefits of a Non-Traditional beneficiary

There are several advantages to having a non-traditional beneficiary.

• You can be sure the death benefits they receive will be used to improve society and promote a worthy cause. Your death benefits could be used for uplifting the neglected and the needy in your community or around the world.



• By making an organization the policyholder you may be able to spare your family from having to pay some taxes since any contribution that is made to a charity is entitled to tax benefits.

Who should consider designating a non-traditional beneficiary?

While the first priority of every policyholder should be to financially protect their own families, if you have already built up a strong financial foundation—a tidy nest egg, the kids are out of college and are settled in their own homes—you might want to consider how your financial contribution through the proceeds of your death benefits may make an impact on your community. Your death benefits may help an organization to enhance your old college campus, fund an outreach program, sponsor events organized by national or international organizations that work for the upliftment of society. You can donate to your favorite cause and make a difference in any outreach effort.

What you need to do

The policyholder and the non-traditional beneficiary should share a unique relationship. It may be an organization, college, school or church where the policyholder is a key financial contributor. Most life insurance companies require an established relationship to the policyholder.

Talk to your agent or with representatives from your life insurance company about how you can designate a non-traditional beneficiary for your life insurance policy. Here’s what you should keep in mind:

• You need to prove relationship with your non-traditional beneficiary. Keep a documented history of contributions made to your college or charity. Life insurance companies will generally support your request to issue death benefits to a non-traditional policy if you bear relationship to them by making regular contributions.



• The amount of contribution you make should also have some bearing to the amount of death benefits that will be made to the beneficiary. For instance, if you’ve been making a nominal contribution every year, life insurance companies may not see it as matching up to a $500,000 policy.



• Your non-traditional beneficiary might be able to get tax advantages on your death benefits if you work with the organization’s treasury or alumni relationship department and make arrangements to designate that organization/church/social organization as the policy owner, beneficiary and premium payer. The insurer could make an annual contribution to the organization as a re-imbursement on the premium paid by the organization. Your contribution would be a tax deductible contribution.

Finding a life insurance company that is experienced in non-traditional beneficiary policies

Find a life insurance company that frequently deals with non-traditional beneficiaries. You’ll find these through multi-carrier brokerage firms online. These companies will help you determine whether a non-traditional designation option is right for you, and make sure you have the necessary documentation to help you get the process easily and quickly started.

About AccuQuote:

AccuQuote is a leader in providing term life quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term life insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers.