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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insu...

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Reviewed by Rachael Brennan
Licensed Insurance Agent

UPDATED: Nov 9, 2020

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One of the most recent trends that has sprung up on the Internet is using crowdsourcing sites such as GoFundMe as an alternative for life insurance. 

But, is this approach really the best way to go? And, can you really get the financial funding you need?

Let’s do a quick primer at how these sites work and find out if they are really viable as an alternative to life insurance.

A crowdfunding site such as GoFundMe is being used as a means to raise money where the expectation is that a large group of people such as friends, family, and strangers collectively submit donations to a particular cause.

Alternatives To Life Insurance

  1. Life Insurance Vs Crowdfunding 
  2. Tax Issues  
  3. Funeral Costs 
  4. Term Life  for 50 – 59 Years Old 

Generally, the person who sets up the page sets a financial goal that they hope to achieve through these individual donations.

The financial goal can be as low as $1,000 dollars to tens of thousands of dollars.

Some of the reasons that people use to set up these crowdfunding pages include reasons such as:

  • Funeral Costs
  • Critical Illness Costs
  • Accident Costs
  • Co-Insurance health group plan deductibles
  • Health costs not covered by a plan

Some of these reasons are commonly used when people experience unexpected financial costs, or don’t have life insurance that can cover them especially when the person is either expected to pass away soon or has already done so.

RELATED: 5 Critical Tips You Must Know Before Buying Life Insurance

The question is whether is would be better to spend a few dollars per month on a life insurance policy which can more than adequately cover many of these unexpected expenses or is it better to put your hope in setting up a crowdfunding page?

Health costs, accident costs, and health plan deductibles can be a good reason to set up a crowdfunding page because clearly, life insurance won’t help while the person who needs the funds is alive and likely to live for some time.

This is especially true if you need the funds immediately to pay the bills.

So, clearly, there are many beneficial reasons that a site such as GoFundMe can be very helpful in some situations.

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Life Insurance Versus Crowdfunding

There are also situations when crowdfunding may not be the best route to go.

Let’s take the funeral cost for example. The average cost of a funeral in the U.S. according to the National Funeral Directors Association is just over $7,000.

If that is the bill you expect to incur from a loved one who is about to pass, will you actually be able or can you really depend on a crowdfunding site to raise the funds you actually need?

Candle vigil for lost family member

There are a lot of sad tales of people who are trying to raise money to pay for the loss of a loved who had no life insurance and surviving family members who didn’t have the cash to pay for a funeral.

Here’s one example I found when I was checking some of these pages.

In this instance the family lost “Billie”, and they are trying to raise $10,000 to pay for the funeral costs.

They set up the page 5 months ago and have received contributions from as many as 62 generous souls who wanted to help.

The problem is that so far, after 5 months, they have only succeeded in raising $4,361.00 which is well shy of their goal.

That’s one of the first problems I noticed when it comes to these sites is that they often fall short of their goals.

What happens if they don’t succeed in raising the full amount of the money they need?

Well, on the GoFundMe platform, there are more than 22,000 funeral and tribute campaigns, but on average they raise
$2,200
which is well short of the average cost of a funeral.

Beware Of Tax Issues for Crowdfunding Sites

You also need to be aware that if you raise more than $20,000 or have received more than 200 contributions, the promoter will have to complete a 1099-K and report the money to the IRS as income.

Funeral and related costs are generally tax-exempt, but this and other issues can complicate your situation if you are not careful.

RELATED: Check Sample Life Insurance Rates by Age (No Personal Info Required)

Why a Life Insurance Policy Makes More Sense to Cover Funeral Costs

The alternative to covering funeral costs for loved ones who are ill and expected to die while having no life insurance is that their family members really need to consider that it might be worth the while to buy a policy for their loved ones before it’s too late.

There could be many reasons why people haven’t bothered to buy a policy for someone in their family who is elderly and not well.

Likely the most common reason is that you might think a policy will be either too expensive or that the person applying for a policy may simply be automatically declined by every insurer you apply to.

But, did you know that there are policies out there which are designed to provide life insurance coverage for exactly these types of situations?

If, for example, you have family members such as your parents or an elderly sibling who is still somewhat healthy or has just been diagnosed with what is likely to be a terminal disease, you can still find affordable life insurance policies that will give you the financial help you need to pay not only for their funeral costs, but also some of the debts that they leave behind.

There are policies known as “Guaranteed Issue Life Insurance” policies. Some of these might be advertised as “Final Expense Life Insurance” or “Funeral Cost Life Insurance”. The point is that these policies are guaranteed and do NOT require a medical exam.

There are also very cheap Term life insurance policies which you can buy for a loved and these can be especially affordable if your loved is still in relatively good health.

To show how affordable some of these term life insurance policies can be, I have provided some sample quotes as you will be quite amazed at how affordable and inexpensive they are if you buy while your loved one is till relatively healthy.

Term Life Insurance Quotes, 50-59 Years Old
Age                                       $100,000     $250,000     $500,000     $1 Million
50 Year Old Male                 $14.16              $24.36             $42.20             $76.56
51 Year Old Male                  $15.22             $26.97              $48.05            $88.56
52 Year Old Male                  $16.08            $29.20              $52.32            $98.58
53 Year Old Male                  $17.11              $32.82              $59.57            $109.89
54 Year Old Male                  $18.40            $36.34              $66.22            $120.15
55 Year Old Male                  $19.69            $39.56              $72.67             $133.06
56 Year Old Male                  $21.16            $43.22               $79.98            $149.97
57 Year Old Male                  $22.88           $47.52               $88.58            $166.88
58 Year Old Male                  $24.94           $52.20              $98.90            $182.01
59 Year Old Male                  $26.80           $56.33              $107.45           $199.81

(Premium Rates based on healthy, non-tobacco using male, 10 year term life insurance quotes, as of 9/3/2015, subject to change)

Sometimes, family members need to be proactive and take charge if they don’t want to incur the expense of a costly funeral.

I understand that there are many people out there who are just getting by on fixed incomes and simply can’t afford the extra cost for a policy.

As their family members, and some of you might not be aware of this, but you can buy a policy on their behalf!

Crowdfunding is quite popular right now, but all it’s going to take is a few unsavory individuals to set up a phony scam to bring these crowdfunding sites into disrepute even though the vast majority are legitimate people who are financially hurting.

When it comes to funeral expenses, life insurance is your best route to go because you, as beneficiary, will be paid a tax-free lump sum payment to take care of all those expenses associated with the expensive costs of a funeral today.

An independent agent such as myself can perform all the comparison shopping for your loved and find the most affordable policy available so call me today so don’t get caught short by having to rely on a crowdfunding site to pay for the hefty costs of a beloved family member’s funeral.

Call me today at 888-603-2876 as we can help.