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Life Insurance
Donating your life insurance for cash
Life insurance policy is not just something that you take to provide for your families, which are depending on you in the event of your death. You can also take out one in which your mentioned beneficiary is a charity that you feel very much about and which you have made some efforts to help.
What kind of a policy should you take when you decide to donate it for charity? Obviously Whole Life Insurance! This is because, Whole life insurance policies, applies for you whole life and all you need to do is pay the premiums right unlike a term life insurance policy wherein the policy lapses after the expiry of the set term or period. You get tax benefits for the premiums you pay as well as for the cash value of the policy.
Before you decide to make a charity a beneficiary of your policy, check out if they have a non-profit status. This will apply only when an organization is a 501(c) (3) organization. It is only when you donate to charities with a non-profit status that you can make deductions. You should also mention them as the policy owner and you as the person making the premium payments, otherwise you cannot get tax exemptions on the payments.
Next inform them that you are intending to make them the beneficiary for your life insurance policy. Let them know that they have to take steps to make a claim to get the payout in the event of your death and make sure they are okay with this part. Most non-profit organizations are too busy to get into the process of making claims on life insurance, while some do not accept this form of donations at all.
In case they accept, make sure that someone responsible within the organization can be counted on to get on with the process of making claims when the time happens for it. If you have worked with a charity for a long time or are a constant donator to its activities, you can be sure to get through the small requirements that you need to carry out, to mention them as a beneficiary in your life insurance policy.
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