Will a GoFundMe gift affect your home insurance claim payout?

In December 2021, the Smith family in Baden, Ont. lost their entire home in a catastrophic fire on Christmas Day. Thankfully, the entire family and their pets survived, but they lost everything else: furniture, cars, clothes, and all the memories you collect while living in a home.  

Their insurance company helped them with short-term relocation options — but the family also received another form of support. 

Friends and strangers started a campaign on GoFundMe, an online crowdfunding platform. In a matter of days, the page raised more than $26,000, spurred by the media attention given to the family.  

In total, the GoFundMe campaign would go on to collect more than $40,000. 

When tragedy strikes, the kindness of others can help families in need. However, if homeowners already have home insurance, why might they need to accept donations? And if they do take the gift, will it limit how much coverage they can later claim? 

Here’s what you need to know. 

The best safety plan is home insurance 

The reality is that most people can’t rely on others to raise the funds they’ll need to replace the entire contents of a home.  

However, a good home insurance policy will cover most of what would be lost in the case of a fire or other damage to a home.  

“It’s amazing to see people helping out after the fact,” says Stefan Tirschler, former product and underwriting manager at Square One Insurance Services Inc. “If a policy had been behind this person, there would have been a lot of protection ready.” 

Generally, if you have a mortgage you will have been required to get home insurance anyway — but that’s not the case if you bought your home outright. You may also be at risk as a renter if you forgo tenant insurance. 

However, if you do have a home insurance policy in place, a crowdfund could cover your deductible, which you are required to pay when you make a home insurance claim.  

Another area where the donated money could help is bridging the gap if the value of the items in your home has changed, but you didn’t update your insurance policy. 

“Perhaps a customer realizes that they forgot to buy coverage for a new piece of jewelry ahead of the house fire,” says Tirschler. “That's another opportunity for a surprise family crowdfund to help out.” 

Read more: How to make an inventory list for home insurance 

Proceeds from a GoFundMe campaign is not your insurer’s business 

It isn’t your home insurance provider’s business whether you get additional financial assistance from family, friends, or strangers in a GoFundMe. 

“Crowdfunding is a comparatively new way of gifting money, but gifting money isn't a new thing at all,” says Tirschler, adding that normally, insurance companies don’t have a reason to ask if you are receiving other funds. 

“Whether you use a platform for it, or friends and family were to help you out privately with a little extra to get through a stressful time, we as a home insurance provider don't generally have a stance on that as the funds are yours to use as you wish,” He adds. 

And since the money is also considered a gift, according to Gerry Vittoratos, a financial expert at UFile, it isn’t taxable. Though the person giving the money can’t claim it as a charitable donation either. 

Related: What Canadian homeowners can claim on their taxes 

You can have financial gifts and home insurance – just don’t double dip 

While getting a financial gift generally won’t affect the amount of money you receive from insurance, it could affect your coverage if you use it for things already covered by your policy. 

“Insurance is designed to only cover the actual loss that you sustain,” says Tirschler. For example, if someone used GoFundMe money to rebuild their house after a fire, they couldn’t also make a claim against their insurance policy for the cost of reconstruction. 

That’s why it’s important to be clear on what your existing insurance policy covers. If you replace your laptop with money from a GoFundMe, and then purchase another laptop with money you received from your insurance provider, that’s double dipping — and you may have to pay back the cost to the insurance company. 

Still, these fundraisers can help families in need in other ways.  

“(Say) you’ve been living in a hotel while your condo is being repaired for a toilet back up you’ve suffered,” says Tirschler. A GoFundMe or monetary gift can be fun money to make a bad situation better. “Maybe you go and have a spa day or go for a nice meal instead of trying to get by every day.” 

In that sense, a financial gift can supplement recovery — but it shouldn’t replace insurance. Make sure you have an insurance plan that offers you protection without jeopardizing your ability to make claims.