Case Study: Crowdsourcing vs. Life Insurance
Many turn to crowdsourcing as a solution for family emergencies. But what are the implications of planning for your family’s needs using online crowdsourcing vs. life insurance?
OBJECTIVE
To compare a hypothetical outcome of raising $100,000 via a popular crowdsourcing app versus a 10-Year Term Life insurance policy from GBU Life (GBU).
INITIAL DATA GATHERING
| Crowdsourcing App | 10-Year Term Life | |
|---|---|---|
| Goal | $100,000 | $100,000 |
| Taxes | Income tax(1) | - |
| Fees | 2.9% + $0.30 per donation(2) | - |
| Cost | - | est. $43.83/month(3) |
ADDITIONAL BENEFITS OF GBU LIFE INSURANCE
- Wellness programs
- Donation matching
- Education programs
- And so much more!
CROWDSOURCING HYPOTHETICAL
Marianne is ready to retire, but she is particularly worried about the first 10 years of this new lifestyle. What if something unforeseen happened and she passed away? Family could always use a popular crowdsourcing app in hopes of raising money4. According to Forbes, less than 12% of crowdsourcing campaigns reach their goal5. With this in mind, plus the variability of donors, let’s say the campaign was able to secure half of the goal ($50,000) through 100 separate donations of $500 each. With a 2.9% + $0.30 fee taken from each donation2, that would leave members of Marianne’s family with $48,520 before tax1.
LIFE INSURANCE HYPOTHETICAL
At 62, Marianne opened a 10-Year Term Life insurance policy with GBU. For roughly $43.83 a month3, Marianne has peace of mind knowing that her family will receive a $100,000 death benefit should she pass away unexpectedly in the first 10 years of her retirement. Marianne named her son, Jeff, as a beneficiary on the policy. This means any and all death benefits would be paid out to Jeff, as long as Marianne was current in her premium payments. Even with 10 years of premium payment, Marianne would have only paid $5,259.60 for a potential $100,000 guaranteed benefit. That’s $100,000 for the covered claim, non-taxed and available to collect as long as the policy is current and up to date with payment.
EXAMPLE RESULTS
| Crowdsourcing App | 10-Year Term Life | |
|---|---|---|
| Goal | $100,000 | $100,000 |
| Gain | Donors | Monthly Premium |
| Cost | - | est. $43.83/month(3) |
| Raised | 50% | 100% |
| Taxes | 3.07%(6) | - |
| Fees | 2.9% + $0.30 per donation(2) | - |
| Benefit | $48,520 | $100,000 |
CONCLUSION
In conclusion, in this hypothetical example, term life insurance coverage was the more feasible solution for covering the potential loss of a loved one.
For more information on additional benefits and financial planning, visit gbu.org for life insurance and annuity products.
- H&CO. (n.d.). GoFundMe Tax Implications. Hco.com. Retrieved November 8, 2023, from https://www.hco.com/insights/gofundme-tax-implications#:~:text=The%20IRS%20has%20specific%20rules,line%20of%20your%20Form%201040.
- GoFundMe (2023, June 16). No fee to create a fundraiser. Support.Gofundme.com. Retrieved November 8, 2023, from https://support.gofundme.com/hc/en-us/articles/203604424-Learn-about-fees#:~:text=No%20fee%20to%20create%20a%20fundraiser&text=However%2C%20to%20help%20us%20operate,charges)%20per%20donation%20is%20deducted.
- This is under the assumption that the recipient was in otherwise good health upon receiving a life insurance policy from GBU Life.
- Olya, G. (2019, August 19). The Cost of Dying in All 50 States. Finance.Yahoo.com. Retrieved November 8, 2023, from https://finance.yahoo.com/news/cost-dying-50-states-090000597.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_.
- Lee, B. Y. (2022, February 5). Most GoFundMe Campaigns for Medical Bills Fail, Less Than 12% Reach Goals. Forbes.com. Retrieved November 8, 2023, from https://www.forbes.com/sites/brucelee/2022/02/05/most-gofundme-campaigns-for-medical-bills-fail-less-than-12-reach-goals/?sh=31f5c5f63f69.
- smartasset. (n.d.). Pennsylvania Income Tax Calculator. Smartasset.com. Retrieved November 8, 2023, from https://smartasset.com/taxes/pennsylvania-tax-calculator.
GBU Life is the marketing name for GBU Financial Life (GBU), Pittsburgh, PA. GBU and its agents do not provide tax, legal or investment advice. Please consult with a legal or tax professional prior to the purchase of any contract. Products and features may not be available in all states. This is a summary of the contract provisions. Please refer to the contract for details of surrender charge schedule, benefits and exclusions. Contract Form Series: ICC20-ST, FL20-ST.2, GEN20-ST, ND20-ST.
