What Happens to Student Loans upon Death

Life Insurance as a Way to Donate to a Nonprofit

Shutterstock_228578737If you have a cause that is near and dear to your heart, be it an alumni association, a charity that rescues pets or the AAP, life insurance proceeds could be just your avenue to make a sizable donation after you’re gone.

There are several ways to go about leaving your policy proceeds (or a portion of them), one of them is the easiest and most straightforward. That is to simply name your charity of choice as a beneficiary. You do not have to leave the entire payout to the charity – you can specify a dollar figure or percentage. For instance, if you have a $100,000 policy, you could leave $10,000 to your cause and the remainder to your loved ones.

Another advantage of using this method as a way to donate is that most people can easily secure a small policy (again, let’s use $10,000). Particularly on a term life policy, the premiums are typically low, but the end result is a sizable donation.

One thing to consider is that with a term life policy, there are generally age limits where the policy terminates. As with all policies of this type, there is a probability that you will have paid on the policy to that termination date and live another 20 years – meaning the policy will not pay out. If this is a concern, a whole or universal life policy might be another avenue to consider.

Another issue to be aware of with the method above is that you will not benefit from the tax advantages of your donation. There is no penalty paid, but there is no advantage to your estate either. There are ways to realize the tax benefits, but they are more complicated and you should consult your attorney or life insurance agent. 

As you can see, there are several considerations while going down this avenue, but using a life insurance policy can be a viable path to making a fairly large donation to a cause you find important and can be a way to leave a tangible legacy.


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nice post.

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