How to give the gift of life insurance

Life insurance is usually thought of as a safeguard—a way to protect your loved ones financially after you're gone. But it also can be a way to make a lasting impression on your loved ones and your community. This might mean providing a financial head start for your children, building a foundation for future generations or even supporting causes close to your heart.

Let's explore how you can gift life insurance and use it to ensure your money goes toward what matters most to you.

While you're free to choose almost anyone as a beneficiary on a contract you own, you can't buy life insurance for just anyone.

The rules can be complicated, but in general, you need two things to buy a life insurance contract for someone else:

• An insurable interest (a financial or emotional stake in their life)
• Their consent for the life insurance contract

Typically, this applies to close relationships like spouses, children, business partners or key employees. In some cases, grandparents can insure grandchildren. However, there is some gray area, so it's best to speak with an insurer or financial professional before moving forward with gifting life insurance.

Life insurance can be a meaningful gift, but it's also important to consider your own financial needs. If you're still working on paying down debt, building an emergency fund or saving for retirement, you may want to focus on those goals first. Those form the foundation of being able to sustainably provide for yourself and your loved ones.

If you have the essentials on track, you may feel more confident that buying life insurance for someone else won't put your financial stability at risk. You then can look at life insurance as a way to provide extra support and create opportunities for those you care about.

Here are a few reasons people consider gifting life insurance:

• Spouse to spouse. A life insurance contract can help a surviving spouse have some financial protection. The death benefit can be counted on to help cover everyday living expenses, pay off a mortgage or provide long-term financial security.
• Parent to child. Parents sometimes use life insurance as a way to give their children a financial head start. The cash value of a permanent life insurance contract could help with education costs, a down payment on a first home or establish a cushion for the future.
• Grandparent to grandchild. For grandparents, gifting a life insurance contract can be a way to invest in their family's future. In the case of permanent life insurance, cash value can be a way to give grandchildren resources to pursue their goals and carry forward family values of providing for the next generation.

Whether the goal is protection, opportunity or legacy, gifting life insurance can be a practical way to extend your generosity once your own financial foundation is secure.

Juvenile life insurance is a type of permanent life insurance contract purchased for a minor. These contracts are typically bought by an adult in the family with the child named as the insured. The coverage can stay in place for the child's lifetime, as long as premiums are paid, and ownership can be transferred once the child reaches adulthood.

There are several reasons families consider this type of gift:

• Lock in low premiums for life. Because premiums are based on the child's age and health at purchase, they're usually lower than quotes they might get later in life.
• Build cash value over time. Children's whole life insurance can accumulate cash value that grows throughout the child's life, which they can use as adults.
• Protect future insurability. Qualifying for reasonably priced coverage can be a struggle if you develop certain health issues. Having a life insurance contract in place can mean they'll always have at least some financial protection.
• Provide a financial foundation. Permanent life insurance plays a role in long-term financial plans. Not only does it potentially offer lifelong protection, but any built-up cash value can be used for future needs, such as education expenses.
• Have a source of support. If the unthinkable happens, a children's life insurance death benefit can help cover medical bills or final expenses during an incredibly difficult time.

For some, life insurance for children can offer advantages, providing protection and opportunities that can be carried into adulthood.

Gifting a life insurance contract requires planning to ensure it's set up correctly. Here are the main steps:

1. Choose the contract type. Decide whether term (temporary protection), whole or universal life (permanent coverage with cash value) or juvenile coverage fits your goals and budget.
2. Decide who owns the contract. Ownership determines who pays premium payments and is responsible for beneficiary changes. You can keep ownership, assign it to the recipient or use a trust to manage and protect the death benefit.
3. Confirm eligibility and consent. Make sure you have an insurable interest and get the consent of the person to be covered. If you're purchasing life insurance for a child, consent usually has to come from their parent or guardian. You also may need to answer health questions and go through the underwriting process.
4. Understand taxes and gift limits. The premiums you pay for someone else or the value of a transferred contract may count as financial gifts. In 2025, the annual exclusion amount is $19,000 per recipient. Larger gifts may require additional forms from the IRS, and life insurance gift tax rules should be reviewed with a financial advisor and tax professional.
5. Set up or transfer the contract. For a new contract, submit an application, name the owner and the beneficiary and pay the premiums. To gift an existing contract, complete your insurer's ownership-transfer and beneficiary forms.
6. Review the contract annually. Make sure ownership, beneficiaries and premiums continue to align with your intent and goals.

Minors can't own life insurance. When giving life insurance to a minor, a parent or guardian (or the custodian of a trust) holds ownership until the child reaches adulthood, at which point the ownership can be transferred.

Life insurance can be an impactful gift, but it can also bring some challenges.

• Premiums are a big factor. Some policies require ongoing payments that you or the recipient must cover for years, while others may be funded with a lump sum.
• Keep the gift tax rule in mind. Premiums or the transfer of a contract may count toward annual limits, and larger amounts could require tax filings.
• Realize the level of commitment. With permanent or juvenile policies, you may be entering into a long-term financial relationship that requires ongoing monitoring over time.

Because life insurance rules can be complex, it's wise to consult with professionals—such as your financial advisor, insurer, legal counsel and accountant—before finalizing a life insurance gift. They can help you make choices about the contract so your generosity has the most valuable impact.

Charitable life insurance also can be used to support the causes you care about. A charitable life insurance beneficiary designation allows you to name a charity to receive all or a portion of the contract's death benefit.

You also can transfer ownership of an existing contract, which may provide an immediate charitable tax deduction, or donate dividends from a participating contract as an ongoing gift. You also can transfer the ownership of a new life insurance contract to charity, after which you may be able to take charitable deductions for ongoing premium payments as you make them. This further can reduce the ultimate cost of your gift of life insurance.

These strategies can help you create a meaningful impact for the causes you care about most, while also offering potential tax advantages for you. More importantly, they allow you to leave a legacy that reflects your values and extends generosity beyond your family.

Life insurance can do more than provide financial protection after you die. When gifted thoughtfully, it can create opportunities for your children, security for loved ones or lasting support for your favorite causes.

To decide how it best fits into your overall financial strategy, consider speaking with a Thrivent financial advisor.