Can You Rely on Crowdfunding for Healthcare and Funeral Costs?

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While illness and death are both facts of life, we’re not always prepared for the financial burden caused by tragedy.

Thankfully, the interconnectivity of the internet has presented a solution to what often feels like the insurmountable costs of healthcare and final expenses: crowdfunding. People have been increasingly relying on crowdfunding sites for memorial costs or healthcare expenses.

What is Crowdfunding?

Crowdfunding is a means for people – family, friends, or even strangers – to donate toward a common cause or “campaign.” Funds raised through crowdfunding can go toward paying down anything, including healthcare costs, covering final expenses, or even giving family or next-of-kin a vacation after a period of illness or mourning.

The cost of medical care and final expenses can quickly add up and overwhelm those expected to pick up the tab.

Medical bills pile up from lost wages and healthcare costs. In fact, an individual without insurance can expect to pay between $150 to $3,000 for a single emergency room visit. For more extensive treatment, the cost of medical care can skyrocket into the tens or hundreds of thousands.

End-of-life expenses are also expensive. The average funeral and burial costs $8,755, but other expenses don’t disappear simply because someone has passed on. Bills like mortgages, credit cards, and car payments remain, often after a substantial reduction in a family’s income and savings.

Crowdfunding has grown so popular and effective that the space is becoming competitive. In early 2018, GoFundMe acquired YouCaring, a smaller rival, and increased its footprint to include over 60 million donors in 19 countries.

Smaller and newer crowdfunding platforms like Fund the Funeral have cropped up in an attempt to carve out a niche in the space.

How Does Crowdfunding Reduce the Impact of Tragedy?

Each year, over 125,000 memorial campaigns are launched on GoFundMe, raising over $330 million. Another 250,000 healthcare campaigns are started on GoFundMe, bringing in over $650 million.

GoFundMe campaigns aren’t subject to a platform fee. And with the exception of payment processing fees, organizers have immediate access to incoming donations.

This access helps alleviate growing financial concerns before they become overwhelming, sparing families in the midst of crisis from concern over how to pay bills or meet insurance deductibles.

Crowdfunding can go a long way toward covering the gaps left from being ineligible for government assistance. It can also negate the effects suffered by those without workplace benefits, insurance, or who are denied insurance coverage.

Money earned through crowdfunding can also be used to cover lost wages or supplement compensation plans like workers’ compensation or disability insurance, which often pays out only a portion of an individual’s salary while they recover.

Social fundraising, as crowdfunding is also called, has the potential to rally large communities to a common cause. Once a campaign is shared with a personal network, a compelling campaign can resonate within a community, turning a handful of donors into thousands.

The Downsides of Crowdfunding After a Tragedy

For all its positives, crowdfunding after an emergency or tragedy is not without its risks.

What if a crowdfunding campaign doesn’t meet that goal? Next-of-kin will have to make up the difference somehow. If a family member passes away, has no savings, and isn’t covered by life insurance, a survivor is left footing a bill of $8,755, on average, for final expenses. Worse, funeral homes might be inclined to upsell services to a family reliant on crowdfunding for paying the bill.

The New York Times further reports that some organizers may launch a crowdfunding campaign for a cause in which there is no financial need. In other cases, organizers may go so far as to fake an illness as part of an elaborate scam.

These issues are made worse because crowdfunding is not regulated in the same way charities are. Campaigns have little oversight, though third-parties often establish an extra layer of such. A campaign that promises to donate excess funds to charity, for instance, has no actual obligation to do so. Instead, organizers can do what they wish with the money that is raised.

Before donating, do your due diligence to get a feel for the legitimacy of a campaign.

Don’t Rely on Crowdfunding Alone for Funeral and Medical Expenses

Not all crowdfunding campaigns go viral. The average amount of funds raised in 2017 across all categories was $7,000 – an amount significantly less than the average cost of a funeral or major medical expenses.

There is a 10% chance for a medical crowdfunding campaign to meet its goal. While social fundraising can go a long way toward reducing the financial impact of a tragedy, it’s often not enough to relieve financial strain on grieving family.

A more effective means of protecting your family’s financial stability following a tragedy is by planning in advance.

Alternatives to Memorial or Healthcare Fundraisers

Start by establishing smart savings habits and an emergency fund. Crowdfunding for healthcare or final expenses can always supplement the funds you’ve set aside for an emergency.

If traditional health insurance is unavailable or unaffordable to you, consider joining a healthcare sharing community. Such communities work similarly to insurance by pooling members’ monthly or annual payments. These funds are used to look after and pay for members’ healthcare.

Non-profit memorial societies handle final wishes in a similar vein. Memorial societies aid members in pre-planning funeral arrangements so surviving family members aren’t left footing the bill.

Buying a life insurance policy can do more than simply covering final expenses. It puts the planning in your hands before tragedy strikes. With a large enough death benefit, proceeds from life insurance pass tax-free to your beneficiaries and can pay off debt, establish a college fund, or even be used to send your family on a much-needed vacation.

Memorial fundraisers and crowdfunding for healthcare can work, but it’s not a guarantee your family and loved ones will be spared from all expenses. A little planning can go a long way to protect your loved ones’ financial futures.

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