Turning Unwanted Life Insurance into a Lasting Legacy

Every year, countless life insurance policies are cancelled, surrendered, or simply allowed to lapse. In many cases, these policies are no longer needed, have become too expensive to maintain, or have been overlooked as clients’ circumstances evolve. What many policyholders do not realize is that an unwanted life insurance policy may still hold significant value, not only for the policyholder, but also for a meaningful charitable cause and, in certain cases, for their financial advisor as well.

Rather than surrendering or cancelling a policy with little or no benefit, donors may be able to create a lasting legacy and potentially receive a significant charitable tax receipt. In contrast, advisors may benefit from continued or renewed compensation opportunities, depending on the structure of the case. This program offers a unique way to align philanthropic objectives with sound financial, estate, and practice management outcomes.

Before outlining how the program works and who it may be suited for, there is one key point to note. To ensure this “Charitable Foundation” can focus its resources on qualified opportunities, its name is being withheld at this stage. This helps prevent an influx of inquiries that may not meet the program’s eligibility requirements. If you believe you have a client who fits the criteria outlined below, please contact your QFS Business Development Manager or me directly to begin the review process and obtain additional information.

This national “Charitable Foundation” is dedicated to advancing breakthrough research into connective tissue genetic disorders. Through an innovative life insurance donation program, this “Charitable Foundation” enables individuals to convert dormant, unwanted, or no-longer-needed life insurance policies into meaningful charitable gifts that support life-saving medical research and patient care.

The program is best suited for clients who meet all the following criteria:

• Age 50 and older.

• Medical impairment or otherwise unlikely to qualify for new life insurance coverage at standard rates.

• Considering allowing a policy to lapse due to affordability concerns or because the original insurance need no longer exists.

  
  

In some cases, older policyholders, or individuals whose health has declined, may find that their policy carries significant donation value. When a policy qualifies (as per the “Charitable Foundations” guidelines), donors may receive a charitable tax receipt valued at approximately 10% to 50% of the policy’s face amount (based on an actuarial assessment of the “Fair Market Value” (FMV) of the policy), while eliminating the obligation for future premium payments. The tax receipt is valid for the current year + 5 years and can be claimed against 75% of income (including RRSP/RRIF and provides the donor with the opportunity to fund meaningful personal and family projects.

For more information on the Fair Market Value (FMV) assessment, see section (1)(b) “Donate an old/existing policy – Charity as Owner and Beneficiary” Charitable Giving and Life Insurance: Part 1: Ways to Donate Life Insurance to a Charity

The process is designed to be straightforward and efficient. The “Charitable Foundation” conducts a brief telehealth interview followed by a review of the donor’s medical records. Once the medical underwriting and actuarial assessment are completed (at no cost to the client or advisor) and if the donation is approved, the charity assumes ownership of the policy and becomes responsible for all future premium payments. While not every policy will qualify, successful donations can provide meaningful benefits for both donors and the charitable community. To manage expectations, approximately 1 in 5 cases that proceed to the telehealth stage are ultimately accepted, primarily focusing on clients with medical impairments or those unlikely to qualify for new coverage today.

This “Charitable Foundation” is committed to maintaining the highest ethical standards throughout the donation process. Beneficiary consent is required, personal interviews are conducted prior to acceptance, and donors are encouraged to seek independent tax and legal advice. These safeguards ensure that all parties are protected and that each donation aligns with the donor’s intentions and objectives.

For financial advisors, this strategy offers more than a charitable planning opportunity. Advisors continue as Agent of Record on behalf of the “Charitable Foundation” and may be able to continue receiving renewal commissions on existing term policies that are donated to the charity. In situations where the charity later determines that converting the policy to permanent insurance is advantageous, advisors may also be able to earn new commissions associated with replacement coverage. Finally, the monetized tax receipt can create assets under management (AUM) for the advisor to continue managing within the portfolio.

This creates a win-win outcome: clients receive tax advantages and create a meaningful legacy, the charity secures long-term funding for medical research, and advisors preserve or enhance the value of cases that might otherwise have been lost through policy cancellation.

Instead of allowing valuable policies to go unused, donors can transform them into a lasting legacy that funds research, supports families, and advances the search for life-changing medical breakthroughs. What would otherwise have been a cancelled policy becomes a powerful philanthropic tool—benefiting clients, advisors, and the broader community alike.

Tony Gallippi 

Head of Advanced Planning, Insurance

QFS

tony.gallippi@qfscanada.com