Everybody dies. Also, almost all fraternal groups and churches are losing aging members faster than newcomers join. The conjunction of these facts suggest a convenient way to put a new roof on your church or pay your club’s electric bill. Have the organization pay for life insurance on its members. Nothing greedy- just $5-10k per member, presumably once they are old enough for this to be an actuarially sound investment.
Assuming the members agree, is there a problem with this? Can the Brethren have an insurable interest in your demise if you trust them enough to agree?
Over here, a common way for charities of all kinds is to offer a free (or reduced cost) will writing service. They are not allowed to make it a condition, but it’s expected that the charity will be named as a beneficiary. Our church did this last year and will probably repeat the experiment.
Insurance companies don’t exist for the purpose of putting new roofs on churches. You can be sure that whatever premium they charge, their expectation is positive, so the insuring entity’s is negative. In other words you can’t come out ahead by this strategy.
The plan as outlined in the OP wouldn’t fly. The beneficiary of a life insurance policy must have an insurable interest in the person insured. “Insurable Interest” speaks to an unavoidable financial hardship the beneficiary would suffer in the event of the death of the insured person. Think: family member, or key talent in a business (not oompa loompa talent, but high-level management talent that will incur significant recruiting expenses to replace). Voluntary members of an organization wouldn’t represent an insurable interest because the only reason they are difficult to replace is because the organization lacks broad appeal–its own fault for sucking.
That said, if they love the Water Buffalo Lodge so much, there is nothing preventing the members from including the lodge in their wills. Or making the Lodge an appealing organization to the community to encourage new membership.
Correct me if I’m wrong- but doesn’t the insurable interest requirement only apply if the beneficiary buys the insurance (the beneficiary and the owner are the same entity)? It seems to me the members are free to buy life insurance and name the organization as the beneficiary.
IME the policy underwriters will question naming the organization as the beneficiary and will come back with more questions to clarify exactly what is going on. The concept they are trying to avoid is incentivizing the death of someone, the loss of whom as an individual wouldn’t result in significant financial hardship to the organization.
As people have noted, buying insurance policies will not be better than just investing the life insurance premiums.
Instead, set up a fundraising appeal seeking bequests. People can leave money in their wills, designate the charity as a beneficiary in retirement plans, set up charitable remainder trusts, name the charity as a beneficiary in life insurance policies, or set up payable on death bank accounts. Someone on the development committee should learn about these mechanisms and be prepared to answer donors’ questions about how to give these ways. A well run charity can live forever. Bequests allow a person’s life to have an impact on the organization they love far into the future. The way bob++ suggests seems like it could veer into manipulation but I’m sure it all comes down to how the program is executed.
I see stuff in alumni newsletters a lot about getting an insurance policy that pays the school when you die. Of course, they have a recommended insurance company and all that.
The school doesn’t care that this may not be the best way financially to give them money, but if you fall for it it’s a lot better guarantee of them getting the money. So a net win from their point of view. (Plus they aren’t damaging their chances much of getting money from more astute alumni the usual ways.)
Under the correct circumstances, the premiums for the policy are tax deductible. This can tip the balance, especially if the benefit has other advantages such as covering the losses due to replacing a key employee. The rules have been tightened a while back to discourage so called “peasant insurance” where a company insures all its employees.