As winter approaches, colder weather and festive holiday celebrations bring people together. The season itself invites a spirit of philanthropy; a spirit of giving and gratitude. It is also a season marked for charitable fundraising as non-profit and philanthropic organizations around the country reach out to their network for continued support. Passionate donors are sometimes limited in their ability to provide the kind of future financial stability for the causes and institutions they champion. One possible solution could be to leverage premium financing in order to secure a financial benefit for a charity from a life insurance policy on the donor. In this way, a person could use premium financing to enhance their charitable gift while retaining their liquidity.
Life Insurance as a legacy for charitable causes
Purchasing a life insurance policy and naming a specific charitable organization as the main beneficiary of the death benefit is a concept that has been around for years. When the policyholder passes away, the charity or organization receives the death benefit to fund its activities. It is a way for donors to continue supporting their interests beyond their lifetime.
One consideration when utilizing life insurance to support charitable giving is the impact that premiums may have on the donor’s liquid assets. Large insurance policies require significant funding that could threaten to drain cash that could yield a higher return on value if invested in the market. The donor would need to consider the value of purchasing a life insurance policy versus simply investing the money into their existing portfolio. This is where premium financing can make the difference.
Premium financing covers the cost of premiums and frees up cash-on-hand
Premium financing allows the donor the ability to use a lending institution to loan the total premium cost of the life insurance policy to the policyholder, requiring less money upfront. The policyholder offers collateral to secure the loan and the life insurance policy is kept in force through the premium payments to the insurer.
The result? The policyholder is able to keep their liquid assets intact while securing a life insurance policy that ultimately benefits their chosen charity or organization. Upon the death of the policyholder, the lender has recouped the balance of their loan plus interest and the remainder of the death benefit is given to the charity.
Premium financing opens many opportunities for those who want life insurance and financial flexibility
Premium finance as a tool to maintain financial flexibility while enjoying the peace of mind and benefits of owning a life insurance policy can be a perfect fit for high net worth individuals looking to leave their loved ones or their beloved philanthropic ventures in sound financial standing after they are gone.
As the season of giving and gratitude approaches, let us know how we can help structure a policy to support charitable organizations through premium financed life insurance. Season’s greetings!