A gift of life insurance is made when you name a charitable organization as the beneficiary of the policy. This means that the charity would receive the insurance proceeds when you pass on.
There are a number of ways to make a gift to charity through life insurance. You can:
Make the charity the owner of an existing, or new, policy
If you already own a life insurance policy, or if you purchase a new policy, you may make a charity the owner and name it as the beneficiary. You will receive a charitable tax receipt for the policy’s cash surrender value and for any premiums you pay once ownership is transferred to the charity. Premiums can be paid either to the insurance company or directly to the charity.
Name a charity as primary beneficiary, or as co-beneficiary
A charity can be named the beneficiary of an existing policy that you own. This is the preferred option for donors who wish to make a charitable gift but want to retain access to the cash value of the policy, or who want to be able to change beneficiaries if their circumstances change. Because you can change your mind about naming the charity as the beneficiary, a tax receipt cannot be issued for annual premiums. However, your estate will receive a charitable tax receipt when the charity receives the gift and this can result in significant tax savings for your heirs.
You can also name a charity as co-beneficiary with other individuals or charities.
Name a charity as contingent beneficiary
A charity can be made a contingent or secondary beneficiary of a life insurance policy. Should your primary beneficiaries predecease you, the charity, as contingent beneficiary, will receive the policy proceeds. Because you can change your mind about naming the charity as the beneficiary, a tax receipt cannot be issued for annual premiums. You estate will receive a charitable tax receipt when the charity receives the gift.