Our lives are arguably the most valuable “possessions” we own, and because we are quick to insure our cars and our homes, insuring our lives should be a no-brainer! This being said, instances arise in which your client’s current life insurance policy may no longer be required.
If your client no longer needs their life insurance policy, it may be recommended that they surrender it in order to free themselves from premium payments. While this seems practical, it is important to consider that even a policy without cash surrender value could have value of another kind, especially if the health of the client has changed.
An alternative option for dealing with an unwanted policy is to donate it to a charity. In this case, the first step lies in having an actuary determine the value of the policy. Then, the client would donate their insurance policy to a registered charity and the charity becomes the owner and beneficiary of the policy. The donor (your client) receives a donation receipt for the value of the policy at the transfer date. If your client continues to pay premiums on the policy, they will continue to receive donation receipts equal to the premiums paid.
This method of gifting allows donation tax credits to be used over your client’s lifetime, allowing them to continue receiving benefits without owning a policy they no longer want.
For more information on charitable giving, read and share the client-friendly versions of How Life Insurance can Help Your Client’s Favourite Charity and Charitable Donations Calculator.
For more information, contact your local PPI Collaboration Centre.