In a famous Seinfeld episode Jerry and George pitch George’s idea for a new TV show to big network executives. When George describes the show to the network executive, the honcho asks what is the show about? George’s answer is the show is about “nothing.” Even Jerry looks at him bewildered and says well it’s about something. George emphatically states no. The show is about “nothing,” absolutely “nothing”.
With Insuring A Better World Fund, the cost to the charity and the donor is nothing, absolutely nothing.
Insurance is risk transfer. Life insurance, like any other form of insurance, is a safeguard for a tragic scenario. It provides financial security for those who are financially dependent on the insured. It is peace of mind for individuals, families and businesses alike, and Americans have shown that life insurance is a valued asset to them. Today, there is roughly $20 Trillion of life insurance in force in the United States.
However, many policy owners arrive at the point where the original reason for purchasing life insurance is no longer relevant (i.e. the spouse or children they needed to provide for are no longer dependent on them and/or the premium cost is too high). Rarely, policy owners will opt for a life settlement, the sale of their life insurance policy. The rest, nearly 90% of policy owners, will simply lapse or surrender the policy.
In fact, The Life Insurance Settlement Association estimates that their industry is serving a very small percent of their potential market. Over $100 Billion of death benefits is lost each year!
That is exactly what we thought. Charitable gifts of life insurance are not a new concept to gift planners and charitable organizations. Key findings from a special report published in 2019 by Giving USA showed that 19% of respondents had listed a charitable beneficiary on a life insurance policy.
Charitable gifts of life insurance can be a powerful tool for an individual to make a legacy gift. However, as many working in planned giving know, life insurance can be a problematic asset for charities.
Traditionally, there have been three ways to donate a life insurance policy to charity.
If the policy is “paid up” i.e. no more scheduled premiums, then the charity receives the death benefit amount upon the donor’s death. If the life insurance policy donated requires additional premium:
Donors may receive a tax deduction.
Provided an “insurable interest” can be demonstrated to the insurance company (usually board members or a history of giving by the insured) similarly, donors will pay the annual premium by gifting the premium amount to the charity each year. The charity acts as a conduit and pays the premium to the life insurance company. The charity receives the death benefit amount upon the donor’s death. Caution: These donations often lapse when either the donor stops paying the premium to the charity or when the life insurance requires increased unplanned premium to keep the policy in force. Due to the prolonged low interest rate environment, required increased premium is quite common today. Donors may receive a charitable tax deduction.
This option allows donors the right to change the beneficiary at any point and the donor determines the portion of the death benefit for charity. Caution: These donations often lapse when either the donor stops paying the premium to the charity or when the life insurance requires increased unplanned premium to keep the policy in force. Due to the prolonged low interest rate environment, required increased premium is quite common today. Donors or their estate may receive a charitable deduction.
All these scenarios require skilled financial planners, significant administrative work from the charity and continue to place an annual financial burden on the donor. Most importantly, despite that coordination many of these gifts lapse. These barriers mean that for most charities and prospective donors, life insurance is significantly under-utilized as a charitable legacy gift.
These barriers have led us to now: a tragedy where American seniors and charities lose billions in benefits annually by lapsing or surrendering unwanted life insurance policies.
Gifting a life insurance policy through Insuring A Better World Fund removes these barriers. Our in-house expertise, policy-aggregation method and secure funding allows a charitable organization to accept a gift of life insurance at no cost to them or their donor.
Our unique aggregation methodology provides for charities designated by donors to receive regular distributions from a large portfolio of donated polices. Traditionally, a single charity does not have the resources to accumulate enough polices to be actuarially credible. We aggregate hundreds of individually donated life insurance policies to establish a vast new source of predictable cash flow to charities. No more waiting for your donor to die!
Our innovation expands charitable organizations’ access to this largely untapped asset class. A charity does not need a robust gift planning program or a life insurance specialist on their team to maximize a policy’s value. This means gift planners (or other staff wearing multiple hats) have more time to focus on stewardship rather than risk assessment.
There is a multi-billion-dollar opportunity for charities in the life insurance space. Each year will bring more opportunity as we are seeing The Great Wealth Transfer unfold. By providing ease of access to charities and removing barriers to donors, Insuring A Better World Fund is making sure policies that inevitably lapse are repurposed to better the world.
Our leadership team will be happy to answer any questions you have regarding charitable gifts of life insurance or Insuring A Better World Fund’s process. You can also view our resources for charities.
Insuring A Better World Fund will provide your organization with free marketing information and answer any questions from donors on your behalf.
There is over $100 Billion of life insurance that is being thrown away each year by your potential donors. 10,000 people a day turn 65. The statistics show that many of your prospective senior-aged donors are already considering lapsing their policy. No change to human behavior is required. This is a no cost ask that transforms an asset they do not want into your next legacy gift.
There is nothing to lose and everything to gain. Together, we can ensure a better world for us all, one unneeded life insurance policy at a time.