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How Term Life Makes It Easier For Clients to Give Back

Americans are generous. Year over year, charitable giving continues to be on the rise, with many people choosing to donate in the form of a direct contribution. In fact, charitable donations hit a record $373.25 billion in 2015, according to the Giving Institute. The 2016 and 2017 Philanthropy Outlook predicts that total giving will increase by 4.3 percent from 2016 to 2017.

But as our pocketbooks continue to be stretched thin, it may not always be feasible to give as much as we’d like to our favorite causes. After all, while giving $5 at the grocery checkout or $20 to your neighbor’s charity run is helpful, these don’t always feel like substantial contributions.

Fortunately, agents can help their clients meet their charitable aspirations through their life insurance policies.

Traditionally, leaving a charitable legacy through a life policy has been achieved in a few different ways, each with its own advantages and potential tax benefits. You’re likely familiar with some of the more common options. A policyholder can designate their registered charity of choice as the beneficiary, transfer ownership of the policy to a charity or name their estate as the beneficiary with instructions to allocate funds to a favorite charity.

But recently, the industry has begun seeing a new trend — the emergence of charitable giving provisions.

Charitable giving provisions are making it easier and more affordable than ever for clients to support a cause that’s meaningful to them. And while charitable giving provisions currently are offered by only a few carriers, these provisions are gaining in popularity. They traditionally have been included only on permanent insurance, but more recently, carriers have begun incorporating them into term insurance products as well.


How It Works

Depending on the value of the policy, the carrier will donate an additional 1 to 2 percent of the face amount to a charitable organization of the policyholder’s choice – as long as it’s a qualified 501(c)(3) charity. And although there are sometimes limitations on the maximum donation amount, this provision still enables your clients to make a contribution by paying nothing more than their premium.

Charitable giving provisions do not always require additional premiums or reduce the value of the death benefit. The payment generally is made as a donation in the name of the insured to the registered charity of their choice, or it can be split among multiple charitable organizations. The donation is often 100 percent tax-free (in that it does not need to be included as part of the insured’s estate) and may be eligible for a charitable tax deduction.

These provisions can be attached to a policy as a rider, or in some cases they already are included as part of the policy. And once the policy is issued and a charity selected, no further action is usually required from the policyholder. So your clients won’t have to worry about incurring the costs and administrative burden of setting aside funds for their charity of choice in an estate or gift trust.


Who Is It For?

A charitable giving provision is a great fit for clients who are active in giving back to their local communities through volunteerism or fundraising, and who want to leave a lasting legacy by continuing their charitable giving after death.

And although this feature undoubtedly will appeal to community-minded and altruistic clients, you don’t have to be a dedicated philanthropist to appreciate the added value that a charitable giving provision offers.

It’s a great option for middle-market families that don’t necessarily have a lot of room in their budget to contribute to charity but want to make a greater impact than they would be able to otherwise. With a charitable giving provision, they don’t have to choose between protecting their family and giving back.

Clients who are looking for financial products that align with their values and support the common good are also a market for a charitable giving provision. Millennials are a good example of this market segment. 

In fact, given comparable price and quality, 89 percent of millennial consumers are likely to switch to a brand associated with a cause, and 40 percent are willing to pay extra for a brand that reflects the image they wish to convey of themselves, according to Edelman research. Given that millennials comprise more than one quarter of the U.S. population and an estimated $200 billion in buying power and are set to inherit approximately $30 trillion in wealth from baby boomers, this demographic is certainly a powerful market segment.


Sales Strategies

When price point and coverage are competitive across carriers, a unique added value like a charitable giving provision really can set a product apart and help you close the deal. Because when clients are presented with the opportunity to give back without paying additional premium and without compromising their protection needs, the choice is simple.

Sales success often comes from not only meeting your clients’ needs, but appealing to their wants as well. In today’s tough economic climate, clients want to feel good about the products they choose — and that includes life insurance.

Whatever the motivation for your clients — whether they see the provision as a way to leave a charitable legacy, give more than they would otherwise be able to afford or just feel good about their purchasing decisions — you can help them achieve it.

Because after all, when you’re meeting with a new prospect, talking about the policy details is only one piece of the conversation. And to many clients, it’s likely not the most interesting or relevant part.

Today’s prospect also wants to talk about what the policy represents: financial security, paying off a mortgage, ensuring their family’s future is protected, covering the cost of college and now, how they can make a meaningful impact by leaving a charitable legacy.

Charitable giving provisions are one more powerful way you can connect with your clients to help you make the sale.


Knut Olson is president, North American life insurance and annuity, Foresters Financial. Knut may be contacted at [email protected]

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