Leave a gift you never thought possible

The Basics

To date we have helped donors leave over $4,000,000 of gifts to various charities in Ontario.

Using life insurance as a charitable gift allows you to leave a gift you did not think possible to the charity you support.

Instead of donating an annual cash gift to your favourite charity, use the cash to fund a life insurance policy that will be paid off in 10 years. Make the charity the beneficiary of the policy.

Illustrative Example

Adam and Sarah Johnson (both 40 years of age) have been donating $3,000 annually to their favourite charity for a number of years.

Their insurance advisor told them they could alternatively use that $3,000 each year to fund a life insurance policy.  After 10 years they will have donated a fully paid up life insurance policy with a value of $190,000!

The best part is the flexibility of how you want the charitable tax credit issued:

  1. Receive a charitable tax credit on your annual premium or,
  2. Receive a charitable tax credit to your estate for the amount of the gift when you pass away


Click each question below to display the answer.

Yes, if you own a permanent life insurance policy that you no longer need you can donate the policy to the charity of your choice. You will be issued a charitable tax credit for the fair market value (FMV) of your policy. Further, if you continue to pay for the policy you can receive a charitable tax credit on the annual premium.

Depending on how you structure your policy will determine the tax benefit. If the charity is the owner and beneficiary of the policy and you are the payor, then you will receive a charitable tax credit on your annual premium. If you are retain ownership of the policy but the charity is the beneficiary, you will forego the charitable tax credit on your annual premium to receive a charitable credit to your estate for the death benefit when you pass away.

A charitable life insurance policy is a permanent life insurance policy where the beneficiary is a charitable organization. With any permanent life insurance policy you can choose a specific payment plan. The premium can be paid indefinitely until you pass away or the premium can be truncated over a specific time period, say 10 or 20 years.

You will need to speak with the charity to discuss the length of your payment plan. Most charities prefer paying the policy off in 10 years so they aren’t left on the hook to pay the premium if you choose to stop. Many donors prefer paying the policy off in 10 years as well because they do not want an added expense in retirement.

There are two types of life insurance policies that can be donated to a charity, whole life policies or universal life policies. The description of these two policies can be found on the life insurance page under FAQ. Most donors choose to donate a specific type of universal life policy, called level cost universal life.

With a level cost universal life policy you pay a known premium each year to donate a specific death benefit (gift). There is no change in cost, there is no change in the size of gift, everything is known. Boring, I know, but this is exactly what you and the charity you are supporting will want.

Contact your insurance advisor. If you do not have an insurance advisor feel free to send me a message or contact the charity you want to donate a policy to.

After speaking to dozens of charitable organizations, most have been scorned in the past with life insurance gifts. The three big reasons are:

  1. Policy setup: There is a specific type of universal life insurance (called YRT) that ties the amount you pay and the size of your gift to an assumed interest rate assumption that the policy is generating. Over time, if the policy is not generating the assumed interest rate, you will have to put additional money into the policy. These policies were widely used in the 90’s when Canada’s interest rates were 8% - 10%. Policies were illustrated to generate a return of 8%, which in our current interest rate environment is very hard to accomplish. Charities are now feeling the ramifications of this as donors are being asked to deposit additional money to fund the policy. Often, donors will refuse, and the charity is on the hook to decide whether to keep the policy afloat or not.
  2. Donor commitment: Imagine donating a life insurance policy when you are 40 and you decide to pay the premium indefinitely until you pass away; you could be alive for another 50 years! What if after 30 years you have no affinity to the charity you once loved? Well, you’ll stop paying the premium and the charity, will once again, have to decide whether or not to pay on your behalf to keep the policy afloat.
  3. Life insurance stigma: I’ve heard, “people just don’t like life insurance.” Fair enough, I can’t change how people feel. All I can say is that life insurance isn’t a belief system, it is a financial tool to help you get from where you are today to where you want to be when you pass away.

How do we combat this?

  1. Guaranteed permanent policy where premiums are not tied to any interest rate assumptions, they are known and will never change
  2. Truncated payment plan of 10 years
  3. Thoughtfully explaining life insurance in a way people can understand

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