Crowdfunding: An Alternative to Insurance?

Word Cloud "Crowd Funding"

I was watching the local news one night and saw a feature about YouCaring.com- a crowd funding website that helps people raise money to cover health care and funerals. Being an insurance nerd, it got me thinking- is this the future of insurance or another way to pay for healthcare or a combo?

So I started researching and this is what I learned:

Crowdfunding is raising money from a large number of people (usually online) where individuals/groups can contribute to your cause or business, there are currently over 450 crowdfunding platforms.

These websites give people an alternative to debt and bankruptcy by providing a platform to raise money to cover medical costs and associated expenses by asking for donations from friends, family and others by sharing over social media.

Asks can range from $1,000 to several thousand dollars, the donations can add up quickly so the recipient can hit their goal. On average though, according to the 2013 Crowdfunding Industry Report, the success rate was around 50%.

I did a little more digging and checked out 3 different crowdfunding platforms since they allowed personal causes on their sites: YouCaring, IndieGogo and GoFundMe

 

Crowdfunding Site YouCaring IndieGogo GoFundMe
Campaign Setup Fee $0 $0 $0
Credit Card Transaction Fee 2.9% + $0.30 per transaction 3-5% per transaction 2.9% + $0.30 per transaction
Pricing None

5% Suggested Fee from the Donor

4% per transaction if goals are met

9% per transaction if goals aren’t met

5% per transaction
Total 2.9% to 7.9%

+$0.30/transaction

7% to 14% 7.9%

+$0.30/transaction

 

Interestingly enough- the total of their percentages really ranges, from 2.9% to 14%, depending on the site, while in some cases I think this might be a bit steep it is still a viable alternative to raise money to:

  • Cover costs of Critical Illness
  • Cover costs from an accident
  • Funeral Costs
  • Pay the deductible or co-insurance from health/group insurance plans
  • Pay costs that aren’t covered by health/group insurance plans
  • Supplement for costs not covered such as rent, mortgage, utilities and other daily living expenses not covered by health/group insurance plans.

As an alternative to critical illness insurance, disability, health or life insurance- I’m not convinced yet but I know it’s something that can help supplement and help those that can’t afford the premiums.