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Nonprofits Struggle to Boost Coffers While Overlooking the Fundraising Potential of Life Settlements
Nonprofit organizations have faced some of the toughest challenges in recent years, navigating the pandemic, economic volatility, and persistent inflation. Many charities are still working to recover from missed opportunities to invest new donor contributions and rebuild the cash reserves needed to support their operations.
The latest State of the Nonprofit Sector reports from Forvis Mazars and the Nonprofit Finance Fund, the primary challenge facing nonprofit leaders in 2025 remains the difficulty of raising funds. This finding is further underscored by the sector’s second most pressing issue: the growing demand for services as organizations are called upon to address increasingly complex social and community needs.
In the Nonprofit Finance Fund’s 2025 survey, 52% of nonprofits reported having less than three months of operating cash on hand, and 18% had one month or less. Additionally, 36% ended 2024 running an operating deficit, the highest rate recorded in the last ten years.
A Powerful Fundraising Tool That’s Still Overlooked
Despite ongoing fundraising challenges and limited operating capital, many charities continue to overlook opportunities to increase revenue by pursuing life settlements for donated life insurance policies that qualify. The reason? Most nonprofits still lack awareness about this topic.
While it is no secret that the secondary market for unwanted life insurance policies has been in existence for more than two decades, awareness about life settlements continues to lag in the nonprofit industry. With 42 of all 50 states now regulating the industry, both consumers and nonprofit organizations are afforded comprehensive protection and oversight. In today’s economic environment, it seems illogical that charities would not evaluate the idea of raising money through life settlements for policies already sitting on their books.
Board and Leadership Challenges Compound the Problem
A more recent and relevant study published by the Urban Institute in 2025, titled Nonprofit Leaders’ Top Concerns Entering 2025, provides important context. In this report, nonprofit executives cited financial stability, fundraising constraints, and staffing shortages as the three most urgent issues facing their organizations. Notably, leaders expressed concern over their ability to engage donors, manage compensation, and maintain board participation in development initiatives.
Given these findings, it’s clear that one of the first places nonprofits should focus to strengthen their development strategy is board composition, specifically by including professionals with fundraising, estate planning, and life settlement expertise.
Donated Policies May Be More Valuable Than You Think
As nonprofits begin to
- Engage professionals who are knowledgeable about life settlements
- Appoint them to board positions
- Conduct fundraising campaigns focused on donated life insurance policies, and the next step is to assess the number of existing life insurance policies owned by the charity.
There is no doubt that many nonprofits are sitting on large stockpiles of donated life insurance policies without knowing their potential value in the secondary market. For example, a white paper summarizing a 2009 study of nonprofits published by the Planned Giving Design Center found that 56% of the 266 charities responding to the survey stated they owned donated life insurance policies with a combined estimated death benefit of $487 million.
Some nonprofits responded that once gifts of life insurance are received, they are immediately surrendered for their cash value. While 74% of the nonprofit respondents stated that they conducted annual policy reviews, others stated they rarely conduct policy reviews, and some even said they conducted policy reviews “when I think about it.”
In 2025, this behavior persists. Newer data shows that even as donor-advised funds and estate planning vehicles grow, many nonprofits are still undervaluing or immediately surrendering donated life insurance policies—missing out on potential settlements that could yield significantly greater value than the cash surrender amount.
Academic Institutions Are Helping Bridge the Knowledge Gap
While awareness of life settlements among the nonprofit sector may be lagging, at least one institution of higher education is stepping in to fill that void. Texas Tech University, home of the nation’s largest graduate program in personal financial planning, has developed a curriculum for the Graduate Certificate in Charitable Financial Planning that includes a course entitled, Using Life Insurance in Charitable Planning.
This presentation, available on SlideShare.net, contains a section that states: “Because of the ‘life settlement’ market, policies may have value far beyond traditional calculations.”
Practical Steps Nonprofits Can Take Now
Given the opportunities available for nonprofits as it relates to donated life insurance policies, it behooves executive staff and board members to rethink their fundraising strategies.
Below are suggested steps for nonprofits that want to incorporate life settlements as a critical component of their fundraising efforts:
- Appoint to the board a respected insurance professional knowledgeable about life settlements who can provide strategic and objective expertise and guide the annual review of policies. (It is recommended that this board member not be directly involved in the life settlement transaction due to the appearance of a conflict of interest.)
- Conduct an inventory of the number of life insurance policies that have already been donated.
- Work with licensed insurance professionals who will agree to volunteer their time to conduct annual reviews and/or facilitate life settlement transactions for any policies that may qualify.
- If the charity does not currently accept donated life insurance policies, consider revising the charity’s gift acceptance policy to include the donation of life insurance policies as a major component of the nonprofit’s fundraising efforts.
- Develop an FAQ about life settlements to educate prospective donors about the fact that their policy may have cash potential beyond what they may have imagined, and that a life settlement might enable them to witness the effect of their generosity while they are still living.
- Institute new procedures wherein newly donated life insurance policies that meet certain criteria are automatically given a preliminary estimate by a life settlement provider regarding the policy’s settlement value in the secondary market.
If you have questions about life settlements or about ways that Abacus Life can assist nonprofits in maximizing the potential of donated life insurance policies, contact us at (800) 561-4148, or visit our Learning Center.
