Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Nov 24, 2021

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The Truth in a Nutshell

  • You can gift someone a new life insurance policy as long as you have a reasonable connection with them
  • Children and grandchildren can use the cash value accumulation to pay for college, get married, or buy a house
  • An alternative method of giving someone the gift of life insurance is to name them as your beneficiary

With the cost of living rising and people everywhere under a financial strain, the gift of life insurance can be a huge blessing. With how much life insurance costs, it’s also an act of generosity.

Whether you give the gift of a brand new policy or add someone as the beneficiary to your own, everyone appreciates the gift of financial security.

Gifts of life insurance are increasingly popular because of all the great benefits it bestows upon the recipient. From investing cash value for your grandkids to leaving a legacy behind, there are many reasons to gift life insurance.

If you want to find affordable life insurance companies that allow gifting, you should look for quotes. Enter your ZIP code into our free tool when you’re ready to see what those quotes might look like for you.

Life Insurance Companies That Allow Gifting

If you’re searching for a company that allows gifting, you’ll be happy to learn that most companies make it easy. In fact, it would be harder to find life insurance companies that don’t allow gifting.

Life insurance makes a great gift for loved ones. The most common recipients of life insurance are:

  • Children or grandchildren
  • Newlyweds
  • Close friends or family members
  • Charities
  • Universities

While you can give or donate any type of policy, the best type for gifting is whole or permanent. As a gift for kids or grandkids, a permanent policy accumulates cash value and gives them the option of being insured for life.

However, before you read about your options, you should keep in mind that there are restrictions about who can receive your life insurance.

For example, you shouldn’t name a minor as the beneficiary of your life insurance. Instead, you should name their guardian or create a trust for them.

Another guideline for gifting life insurance is that you need a reasonable relationship with the recipient to purchase a new policy for them. You can buy insurance policies for family members, close friends, or employees as long as you provide the necessary information.

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How do you give life insurance to grandkids or kids?

As a parent or grandparent, the arrival of a new child often comes with thoughts of the future.

Everyone wants to give their kids and grandkids the best future possible. The go-to for financial planning is a college fund, but a life insurance policy shouldn’t be overlooked.

When you purchase a policy for a child under 18, it locks in low, affordable rates. Buying a policy for a minor is a great way to get the best rates from life insurance companies that allow gifting.

It also guarantees they’ll have a policy later in life when health problems might otherwise disqualify them.

The true gifting power of buying a life insurance policy for a kid or grandkid is that some plans have a cash value. That cash value can be used later in life for college, to start a business, or buy their first house.

If you decide to buy life insurance for a minor, keep in mind that you need to make the monthly payments. When the minor comes of age, you can transfer ownership (and payments) to them. Of course, you can always continue to pay as an additional gift.

Additionally, life insurance companies often offer easy ways to buy insurance for others:

  • Fidelity Life has a rider for new or existing policies that will transfer ownership when the child becomes an adult
  • Gerber offers a Grow-Up plan explicitly made for gifting to children
  • Mutual of Omaha has an easy application process for gifting and provides some of the cheapest rates
  • State Farm offers an affordable Family Life Plan which covers all children in the family as an add-on to the parent’s policy
  • Foresters Financial’s BrightChildren Whole Life plan offers versatile plans and add-ons
  • Globe Life allows the purchase of policies for young adults aged 18-24 without their consent, making it an ideal gift for college students

When you’re ready to buy someone a policy, you’ll need to provide some basic information about the recipient: their name, birthdate, Social Security number, address, and how you are related.

Can you give your own life insurance as a gift?

You can certainly gift the death benefit on your life insurance policy. The payout is tax-free, so it’s a generous gift to give anyone.

Your first option for gifting your death benefit is to name your intended recipient the owner and beneficiary of the policy.

When you do this, the new owner receives the total payout after your death. Of course, if you transfer ownership of your policy, you still need to make payments to keep it active.

You can also name someone as a beneficiary of your policy. If you choose to do this, you remain the owner of the policy.

Gifting beneficiary status gives you more flexibility than transferring ownership. Not only can you select a different beneficiary later, but you can also split your death benefit amongst multiple beneficiaries.

As an additional benefit, you can name whoever you like as the beneficiary — you don’t have to have a close relationship with them. That means you can have your grandchildren as beneficiaries, or your neighbors, a former teacher, or a colleague — whoever you like.

Can you donate your life insurance to a charity?

When you have no one you want to give your death benefit to, or you believe in a cause, you can donate your life insurance to a charity or non-profit organization. Many people purchase a life insurance policy with the idea to donate part or all of it to their favorite charities.

Creating a charity-owned life insurance policy gifts them the financial strength to carry on their mission and helps you leave a legacy behind.

Depending on the organization, the payout of your life insurance policy could make a huge difference.

It also offers you significant tax benefits. If you transfer ownership of your policy to the organization, the IRS considers it a donation. That donation can significantly reduce how much your estate can be taxed after your death.

Additionally, you can deduct premiums that you continue paying as a charitable donation.

Of course, taxes, donations, and life insurance deductions can be confusing topics to sort through. If you’re interested in pursuing the tax benefits of transferring ownership, you should talk to a financial or tax advisor.

You can also donate your death benefit to a university. If you decide to go this route, it works the same as gifting your policy to a charity.

Life Insurance: The Gift That Gives for a Lifetime

Giving life insurance is a generous gift that says you care about the recipient’s future. From charitable donations to your kids or grandkids, everyone benefits from the gift of life insurance.

If you want the best quotes from life insurance companies that allow gifting, you should shop around. If you’re ready to see what quotes might look like for you, enter your ZIP code into our free tool to get started.