Why would I buy Life Insurance? GoFundMe will Pay the Bills

Simon Huften

Simon Huften is the President of Life Insurance Canada.com Inc.

I’m sure many of you have noticed this more and more in the news lately. In the interest of full disclosure, after hearing about this type of situation on the news, I felt it would be a good topic to add to our blog. These stories often share a common theme: an unexpected tragedy leaves a family in financial peril.

They are frequently heartbreaking—families left to cope with the psychological impact of the sudden and unexpected loss of a loved one, while also facing serious financial strain. The story almost always includes the line, “A GoFundMe campaign has been created to support the family.” These families need help covering things like final expenses, education funds for children, medical costs, and general financial support during a time of grief.

Nothing adds to an already devastating situation like the stress of wondering where the next mortgage payment is coming from. Hopefully, crowdfunding can generate enough support to carry the family through without compounding their loss with financial disaster.

While this type of community support can serve as a temporary lifeline, it is by no means a reasonable substitute for the peace of mind that a life insurance policy provides. Let’s take a few minutes to explore why crowdfunding, like websites shouldn’t be viewed as a replacement for life insurance.

In this article: 

• The Truth About GoFundMe Campaigns
• The Costs of Crowdfunding
• Why Should I Get Life Insurance Instead?
• Just how affordable is Life Insurance?
• No One Ever Talks about LIfe Insurance, But They Will Tell The World About a GoFundMe
• Conclusion

The Truth About GoFundMe Campaigns

If you are in a situation where you have just experienced the loss of a loved one and they didn’t have life insurance it is easy to see why crowdfunding is a beacon of hope. If you can get small donations from many people in your community it will help you weather the storm. The downside to crowdfunding is that for every story you hear about there are hundreds of them that you don’t. Stories that make the news get a bit more publicity and are often some of the more well supported campaigns, but according to news stories (here for example) from the U.S., the average crowdfunding campaigns raise about $2000-$2200 USD. Simply put, while it is a wonderful, feel good thing to be able to do, relying on a crowdfunding campaign is not the way to support your loved ones in the event that you pass away. It is a super risky gamble having your families financial security reliant on the donations of friends and family.

The Costs of Crowdfunding (GoFundMe)

Something else to remember is that crowdfunding websites don’t exist purely for the benefit of the people that reach out through them. These websites are for profit businesses and the way that they make that profit is through the collection of transaction fees. As an example, gofundme’s fee structure charges nothing to set up the campaign but they do charge a fee of 2.9% of each donation plus a $0.30 flat amount on each transaction. When significant fund raising is needed it is important to remember that the fees come directly off the top of the account, so when every dollar counts, not all of the donations land in the intended hands of the people in need.

Why Should I Get Life Insurance Instead?

Let’s be perfectly clear about one thing. Life insurance is a financial security product that you choose to own. Typically there are no requirements for someone to own life insurance. 

(As an interesting aside, many separation or divorce agreements when minor aged children are involved will require parents to own life insurance because the need to support children financially must be met, so the family courts understand its importance). 

So if there’s no requirement to own it, why would someone get life insurance?  

• You choose to own life insurance because you want to make sure that your loved ones don’t face financial hardships in the event that you pass away unexpectedly. Many families don’t have enough cash on hand to cover funeral expenses, let alone the ongoing costs of daily living after a loved one has passed away.
• You choose to own life insurance because you care about the long term well being of your loved ones. This may sound harsh, but choosing not to have life insurance to protect your family in the event of the unexpected can be a very selfish decision.  

The choice not to protect your family from the potentially severe financial hardships of an unexpected death is simply not worth the potential outcome. Which of the following two options makes it easier for you to sleep at night?  Knowing that if you passed away, your kids would have fully funded education plans, making attending a post secondary program within their reach or knowing that if you died, someone would have to post a campaign trying to raise funds from crowdsourcing to help pay for some of that education?  To borrow a quote from Tennessee Williams, I would prefer not to have to ‘rely on the kindness of strangers’ to support my family after I am gone.

Just How Affordable is Life Insurance?

There are so many life insurance options available today that choosing not to have coverage is difficult to justify. For example, term life insurance policies are surprisingly affordable.

You’ve likely heard this comparison before, but it truly is comparable to the cost of a daily coffee from the drive-thru — especially if you’re young and healthy. In fact, for less than the cost of a cup of coffee a day, you can secure real protection.

It might sound too good to be true; how is it possible to get a life insurance policy for such a small amount of money? A quick visit to LifeInsuranceCanada.com shows that a 30-year-old male non-smoker can get a 10-year renewable term life insurance policy with an initial premium of around $20 per month for a $500,000 death benefit.

Term life insurance provides a way to offer real financial security to your family in the event of an unexpected loss. Given how affordable life insurance can be, I have to ask again, do you really believe crowdfunding is the best option for your family?

No One Ever Talks about Life Insurance, But They Will Tell The World About a GoFundMe

As someone who has helped many families set up their life insurance plans, I’ve come to realize that I work in a strange industry — no one likes to talk about life insurance.

Think about this: when was the last time someone came to do work at your home or business and you couldn’t wait to tell your friends about it? People love recommending a great tradesperson, often without even being asked.

Now, compare that to the last time you heard someone say something like, “My financial advisor came by last night and we did a great needs analysis. Now I know that if something happens to me, my family will be okay financially.” People just don’t talk about life insurance with their friends.

When it comes to GoFundMe campaigns, all you need to do is scroll through social media — crowdfunding pages are shared widely. For some reason, people are more comfortable sharing the news after the fact that someone died without life insurance than they are celebrating the decision to protect their loved ones while they still had the chance, through a simple insurance policy.

Conclusion

As a final question — how do you think this headline would play on your local news?

“Tragic Accident Results in Loss of Loved One for Family — But Don’t Worry, They Had Life Insurance, So Financially They Will Be Just Fine.”

This is never the story we hear. Instead, we hear about families blindsided by an unexpected accident or sudden illness that cuts a life short — leaving the surviving loved ones facing financial ruin.

Links to crowdfunding campaigns are shared on social media and promoted across various platforms, urging people to help with a small donation. Yes, people talk about crowdfunding as a way to support families, but the problem is, that doesn’t guarantee it will work.

In today’s 24-hour news cycle, how often does a tragic story — where a family suddenly loses a loved one — lead the news one night, only to disappear the next day? Unfortunately, this is often the case. The reality behind crowdfunding is that it needs to stay top-of-mind for many people in order to be effective.

If your story led the news yesterday but isn’t mentioned again, how effective will your GoFundMe efforts be? In many cases, campaigns become virtually invisible — no one hears the story, and as a result, no one donates.

You know what always works when it comes to securing your family’s financial future? Having a sound financial plan that includes life insurance — one that provides meaningful relief for your loved ones when you’re no longer here.

Reach out to the experts at LifeInsuranceCanada.com to ensure you don’t have to rely on others to take care of your family when it matters most.