If you’ve read my post on Charitable Gifts of Life Insurance, you’ll know that you can substantially increase your donations to your favourite charities with life insurance policies. However that post dealt with initiating a new policy specifically for charitable giving. It is also possible to donate an existing life insurance policy that was originally purchased for other reasons.
As you get older and your assets grow, eventually you might reach a point in life where you are self-insured or otherwise no longer have a need for life insurance. Some people will cancel any existing policies while others will continue paying the premiums since it may be more beneficial to do so.
If you are considering cancelling any existing policies, note that another option exists: you can donate this policy to your favourite charity. If you assign the ownership of the policy to the charity and have the beneficiary irrevocably designated to also be the charity you can receive a charitable donation receipt for (at a minimum):
The Cash Surrender Value + Any Accumulated Dividends – Any Policy Loans
If you continue to pay the premiums going forward you would also be entitled to charitable donation receipts for the subsequent premiums paid. You’ll note that the above formula is the bare minimum as you can take the policy to a life insurance policy evaluator who can assess the Fair Market Value of the policy (which might be valued at much more than the above formula). Even term life insurance policies can have a Fair Market Value greater than zero if your health has declined since time of policy issue. Consult with a financial advisor who is well versed with planned giving if you have any questions.