Should You Use Crowdfunding Instead Of Paying For Insurance?
With the invention of platforms such as GoFundMe and other crowdfunding platforms, these are being used as an alternative to paying for insurance.
Recently with the floods a lot of us, myself included have been affected, with homes being destroyed, businesses being impacted, and a lot of issues.
Some of these stories in the paper have affected people mentioning they don’t have insurance and they have set up a page to donate to for support.
They need the support, there is no question.
From this, I have had a couple of discussions with people who are considering using crowdfunding instead of paying for insurance. It’s a completely different way of thinking, the key driver in this was the cost of insurance.
With the cost of living increasing, and the reserve bank continuing its course of increasing the OCR we are all feeling the pinch.
Any option to reduce your insurance expense is always going to be enticing.
Why relying on crowdfunding instead of paying for insurance is not advisable:
Limited Coverage:
Crowdfunding campaigns rely on voluntary contributions from individuals, and there is no guarantee that you will receive the full amount needed to cover your expenses.
The success of your campaign depends on the willingness of others to donate, which can be unpredictable.
Especially if it is a wide event where multiple people are all requesting donations.
Unpredictable Timing:
In the event of an emergency or loss, such as a medical crisis or property damage, you may not have the luxury of time to launch and promote a crowdfunding campaign.
Insurance policies, on the other hand, provide immediate financial support when you need it most.
Lack of Comprehensive Protection:
Insurance policies are designed to provide comprehensive coverage for various risks and potential losses.
They offer specific benefits, such as medical coverage, property protection, liability coverage, or life insurance, tailored to your needs.
Crowdfunding cannot replicate this level of comprehensive coverage.
Legal and Contractual Obligations:
Insurance policies are legal contracts that outline the terms, conditions, and obligations of both the policyholder and the insurance provider.
They ensure a level of accountability, transparency, and legal protection.
Crowdfunding campaigns do not offer this level of formal agreement and may not hold the same legal weight.
Long-Term Sustainability:
Insurance is a long-term solution that provides ongoing protection for the duration of the policy.
Crowdfunding campaigns, on the other hand, are typically short-term solutions that aim to address immediate needs or one-time expenses.
They may not be sustainable for long-term financial security.
Crowdfunding Instead Of Paying For Insurance is Not a Viable Option
While crowdfunding platforms can be helpful in certain situations, they should not be considered a substitute for insurance.
Insurance provides a more reliable, regulated, and comprehensive means of managing risk and protecting yourself financially in the face of unforeseen events or losses.
Any time you want to reduce or alter your insurance give your adviser a call, or if you set the cover-up yourself, contact an adviser to help you understand what you are giving up or if there are alterations that can be made to reduce the premiums.
Just be careful.
Jonathan Whorwood
Financial Adviser
The Insurance Supply Co Limited