charity-life-insurance

Can I leave my life insurance to a charity in Australia?

Find out how life insurance can be a means of some charitable giving.

Everyone dreams of leaving the world a better place than when they arrived in it, and regardless of how well you think it’s going these days, there are various post-mortem moves you can make. This can include:

  • Becoming an organ donor. Donating your body parts can help save lives.
  • Leaving your family with financial security. It’s important to make sure your family is taken care of when you’re gone.
  • Leaving money to charities through your life insurance. For those with a philanthropic goal in mind, this could be an ideal choice.

Life insurance and charity

Life insurance allow someone to make small contributions (in the form of premiums) in order to donate a larger sum (if you die) to a charity of choice.

Is life insurance tax-deductible for charity?

Life insurance premiums are not usually tax-deductible in Australia. This also means that any life insurance payouts you received aren’t taxed either so your beneficiaries won’t need to worry about having any of it disappear.

What happens if I nominate a charity as a life insurance beneficiary?

If a charity is the only listed beneficiary, then the full life insurance payout will go towards the charity. If it is one of several beneficiaries then the payout will be divided among them.

Should I list the charity as a beneficiary on an existing policy?

  • If you want to leave the full payout to charity, then having a charity as a beneficiary is a considerable option.
  • If you want to leave only some of the payout to a charity, it’s probably not a good idea to name it as a beneficiary. Should the other beneficiaries pass away, the charity might end up getting it all, even if you’d prefer for it to go elsewhere.

Do I have any other options?

If you still want to make sure both my family and the charity gets a substantial payout when you die, you might want to consider taking out a separate life insurance policy with the charity named as the sole beneficiary.


How can I take out a life insurance policy for charity

1. Adjust your existing policy

If your beneficiaries financially independent and agree that your lump sum is better served philanthropically, you might re-nominate a charity as the beneficiary. Note: It’s a good idea to consult those beneficiaries before making any changes.

2. Take out a separate policy

A more realistic alternative is probably to take out an entirely separate policy that names the charity, or multiple charities, as the beneficiaries. This means you can:

  • Get a cheap no-frills term life or funeral cover insurance policy that may have lower premiums compared to the size of the eventual payout
  • Pick a lump sum of your own choosing, that’s the actual amount you want to donate to a charity, rather than whichever amount happens to be with your “real” life insurance policy

3. Find a policy that provides an automatic payment

Some life insurance policies may even provide an automatic payment to the charity of your choice at the time of your claim.


Can having a charity as my life insurance beneficiary be contested?

It is possible, but it's dependent on the circumstances.

If you nominate a policy at the time you take out your policy

  • If you take out a policy of with a 'sound mind', and at the time nominate a charity as the sole beneficiary, then that probably won’t be contested.

If you change your beneficiary later on

  • If you change your beneficiary later on it could get tricky. For example, if your children were the designated beneficiaries for the entire duration of the policy, and then at the last minute you decided to nominate a charity instead, it's possible that the change may be contested.

Generally, the beneficiaries would have to demonstrate that the change was done while you were not of entirely sound mind and that there was an undue outside influence.

Sound mind

Sound mind refers to a stable mental condition of someone at the time of naming their beneficiaries (in a life insurance policy). The exact definition may differ state to state.

What else should I know about leaving life insurance to charity?

Legal pitfalls to be aware of

Depending on the nature of your relationship with the charity there may be some risks to consider. For example, you probably shouldn’t try to claim tax deductions by making donations to a charitable organisation that you’re a paid employee of.

Choosing a charity

If you can’t decide, one method could be dividing the sum among different types of organisations, by naming each as an equal beneficiary. For example, you might choose one overseas aid organisation, one Australian-focused charity and one environmental organisation.

You might also want to look into organisations that let you specify how the money is spent. For example, you might want to make sure it all goes to vaccination efforts to get more life-saving bang for buck.

Enquire with an adviser and receive quotes

Please enter your full name
Please enter a valid email address
It's important to give us a valid phone number
Gender
Smoker
Date of Birth
Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
By submitting this form, you agree to the finder.com.au privacy policy
Get quotes

Compare your options with these direct brands

Rates last updated July 21st, 2017
Product details Maximum cover Maximum Entry Age Cooling-off
(days)
Life Insurance
Life Insurance
Choice of cover options and flexible premiums to suit budget. No lock-in contracts and fast application. $1,500,000 65 30 Get quoteMore info
Ozicare Life Cover
Ozicare Life Cover
Get up to $1 million in life insurance with Ozicare Life Cover. $1,000,000 63 30 Get quoteMore info
Real Family Life Insurance
Real Family Life Insurance
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ . $1,000,000 64 30 Get quoteMore info
Term Life Insurance
Term Life Insurance
A simple life insurance product that can offer up to $1,500,000 in a lump sum payment on death or diagnosis of terminal illness. $1,500,000 69 30 Get quoteMore info
NobleOak Term Life Insurance
NobleOak Term Life Insurance
Get a quote for up to $15 million in life insurance cover. Cover can be tailored to meet your personal needs. $15,000,000 69 30 Get quoteMore info
Woolworths Life Insurance
Woolworths Life Insurance
Receive a discount of 10% on life insurance as a Woolworths Rewards Member. T's and C's apply. $1,500,000 65 30 Get quoteMore info

Andrew Munro

Andrew writes for finder.com.au, comparing products, writing guides, sniffing out deals and looking for new ways to help people get the most out of their money.

Was this content helpful to you? No  Yes

Related Posts

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question
feedback