You’ve seen them on your Facebook and Twitter feeds shared by friends and family members, the tragic stories of a loved one’s passing and a plea for help in covering the expense of a memorial or funeral. As crowdfunding has grown, it’s become a go-to resource for many families struggling to cover end-of-life expenses including funeral costs, and to provide finances to care for surviving family.
Memorials, including funerals, are one of the fastest-growing fundraising categories on GoFundMe.com, and 113,000 campaigns created between 2010 and 2014 collectively raised more than $340 million. Memorial campaigns have extensive reach among the public as well, with nearly one in five adults ages 20-39 using the internet to solicit or donate money for funeral-related arrangements, according to a 2015 study.
What’s behind this trend? Three key factors have fueled the rise of funeral crowdfunding:
- The cost of funerals has grown substantially. According to the National Funeral Directors Association, holding a funeral service for a loved one in 1971 would typically have cost under $1,000. Today, that same service is likely to cost $7,000 or more. Over the same period, personal savings rates in American households have dropped from more than 12% to just over 5%, according to federal data from the Bureau of Economic Analysis. Together, these changes mean more families are less prepared than ever to tackle end-of-life expenses.
- Life insurance ownership has fallen. While the number of people asking family, friends and strangers for help in covering expenses following a death has grown, the number of Americans purchasing life insurance has declined. According to LIMRA, covering funeral costs is the number one reason Americans purchase life insurance. Yet the number of Americans who have purchased policies to help their family cope with funeral expenses and other end-of-life costs dropped 32% between 2001 and 2014.
- People overestimate how much insurance costs. Even as ownership of life insurance has declined, premium rates have dropped to near historic lows, thanks to improvements in underwriting and technology. Yet a recent survey by LIMRA found most people overestimate the costs of even simple term life insurance by at least three times. As a result, many don’t purchase coverage when they should.
While seeking donations for memorial expenses may seem like an easy way to cover end-of-life costs, crowdfunding should come with a note of caution. The average memorial campaign raises just over $3,000, based on data from GoFundMe — far short of the cost of many funerals. Further, the uncertainty and unpredictability of covering costs via donations adds more disruption at a time when most families need stability.
The last thing a family should need to contend with in a period of grief is building a crowdfunding page, constructing a narrative and soliciting donations from friends and strangers alike. By contrast, life insurance provides clarity and a measure of certainty.
“Life insurance is first and foremost about peace of mind,” says Salene Hitchcock-Gear, president of Individual Life Insurance at Prudential Financial Inc. “With the right coverage to fit your needs and budget, not only will your family receive a guaranteed death benefit that can help cover funeral costs, but some policies can also offer benefits during your lifetime, like providing supplemental retirement income or helping pay for care in the event of a chronic illness.”
No one likes to think about it. But planning ahead can ensure an already difficult time doesn’t come with added burdens on loved ones. With adequate life insurance in place, you can guarantee your ability to provide for the future needs of those you love — rather than leaving your final expenses up to chance and the generosity of strangers.