Insurance policies

13 key facts about black Americans who are increasingly buying life insurance policies, more than other racial groups

For years, black Americans lagged behind whites in the amount of money they had in life insurance, in part because of decades of ride-based pricing in which blacks were more accused.

However, that is changing.

The 2021 Insurance Barometer study, which tracks the perceptions, attitudes and behavior of adult American consumers, found that 56% of black Americans purchased life insurance policies in 2021 – the highest rate among all racial groups.

“For decades, some insurance companies have made it a common practice to charge black people more for product and offer them small face value funeral insurance that offered little value for the premium paid,” said Judy Hopkins, chief legal officer of Haven Life in New York. “These practices have led to litigation and settlements that were resolved not too long ago.”

A investigation of Haven Life in 2020 found that 22% of black people valued life insurance as a way to pass on generational wealth, compared to 8% of white respondents.

Here are 13 key facts about black Americans who are buying more life insurance policies than other racial groups.

1. The Covid-19 pandemic boosted life insurance sales

Black Americans have been disproportionately affected by covid-19 by catching the virus, hospitalizations and deaths. This devastation prompted black Americans to purchase life insurance at higher rates than other racial groups, BNC News reported.

The death rate per 100,000 people was higher among black Americans than any other group, according to the National Center for Health Statistics.

The pandemic “has put the idea of ​​mortality at the forefront of people’s minds,” Alison Salka, senior vice president and director of financial services firm LIMRA, told NBC News. “So in general we’ve seen that due to the pandemic, almost a third of customers said they were more likely to buy life insurance because of it, but that number is increasing for different groups. demographics, such as black Americans.”

2. Recognize the value of life insurance

Black Americans began to recognize the value of life insurance on many levels, from funeral coverage to debt coverage.

“Our people don’t know enough or don’t see the value of life insurance,” Erwin McGowan, an agent with State Farm Insurance Company, said in an NBC News report. “That has to change. And that’s why I chose where I am – to help those who need it most.

3. Payment of funeral expenses

Traditionally, black Americans viewed life insurance as a way to cover burial costs.

Historically, life insurance was often sold to African Americans as funeral insurance – minor, cheaper policies covering the bare minimum. “These door-to-door salespeople weren’t always honest with them,” said Jessica Smith, an insurance agent in Marietta, Georgia. nerd wallet.

Blacks are now buying more than the bare minimum in life insurance to cover funeral mantles.

There has been an influx of customer-acquired policies since the pandemic began, according to State Farm agent McGowan. Such policies, he said, represent “a level of security that, ‘I can at least bury my loved one with dignity and without worry.’ This is the low end of what life insurance can do. There is so much more to help families. But the biggest problem in our communities is the lack of education about life insurance, in particularly on its cost.

4. Use life insurance as a way to protect the family

Beyond living expenses and savings, insurance is important “to protect your family if something happens to an employee,” said Alison Salka, senior vice president and director of LIMRA, the Life Insurance Marketing and Research Association.

A New York Life 2018 Life Insurance Gap Survey found that 83% of Black Americans view life insurance as a key way to take care of their family.

5. Life insurance as a means of transmitting wealth

In 2020, the net worth of the average black family is less than 15% of that of the average white family, according to the Federal Reserve. Life insurance is seen as a way to pass on wealth, Salka said.

The New York Life study found that 37% of black respondents said they intended to use their policies as a way to leave an inheritance and 28% said they would use life insurance to transfer their assets.

6. A financial goal

African Americans tend to view obtaining life insurance as a financial goal. Despite being more likely to be underinsured, 80% of African American respondents in the New York Life study ranked life insurance as a primary financial goal. By comparison, 63% of all adults in the general population felt the same way.

African Americans tend to be more proactive in solving financial problems than white people, the study found.

“Although African Americans report more financial stress than the general population, they consistently strive to alleviate it by seeking advice from trusted advisors to ensure their family’s future is protected and that their broader retirement and wealth planning needs are being met,” said Eric Jackson. , Corporate Vice President and Market Director at New York Life.

7. To finance education

Sixty-eight percent of blacks in the New York Life study said they wanted their life insurance proceeds to pay for a child’s college education.

“In thinking about their financial future, African Americans recognize the opportunity to use life insurance to protect their families and, at the same time, create wealth for the black community as a whole,” said the vice-president. president of New York Life Jackson. “Our agents consistently see attitudes towards life insurance shift from primarily using the product to cover burial costs to using policies to grow small businesses, fund a college education and leave a legacy for future generations.

8. Life insurance offers peace of mind

Life insurance investments a premium for peace of mind for many black people.

9. Save Money

Depending on the type of life insurance you buy, it can come in handy when households are faced with large unexpected expenses. Cash value life insurance, also known as permanent life insurance, includes a death benefit in addition to cash value accumulation. Variable life, whole life and universal life insurance all have a built-in cash value. Temporary life does not work.

“It could help pay for immediate expenses and provide mortgage protection,” according to Western and Southern Financial Groupa diverse group of financial services companies based in Cincinnati, Ohio.

10. Strengthen the retirement nest egg

“The money can be used for everything from paying college tuition, enhancing a retirement nest egg, tithing to a church, and funding charitable donations to build lasting wealth. and Economic Empowerment in Black America”, said Eugene Mitchell, corporate vice president and head of the African-American market at New York Life.

11. An effort to educate black people about life insurance benefits

Because so many in the black community see life insurance simply as a tool to pay for burial costs, companies have pushed to educate about the benefits of having a policy.

New York Life’s African-American market agents, for example, attempt to build financial literacy in the black community and inform consumers that life insurance can be used for a variety of purposes.

“Life insurance is much more than a quick fix (covering funeral expenses),” Mitchell said. “It’s about helping to protect your assets, create a legacy and pass wealth on to the next generation.
In the event of the unfortunate death of a relative or small business owner, life insurance can move life forward by covering mortgage payments, college tuition, and other bills. It should be considered for its replacement value, not just the final expense.

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12. A savings vehicle

The surrender value of a life insurance contract can be used as savings with guarantees and tax advantages, black business reported.

Policyholders can use cash value as an investment-like savings account, Forbes reported.

13. Investment Tool

Many black agents are trying to get their communities to use insurance as an investment tool.

“You really can’t make your way to wealth, you have to invest your earnings somewhere,” New York Live vice president Mitchell said. “It’s time to look at tools like life insurance as well as look at places where we can find money to invest.”

He added: “We can assure our parents, ourselves and our children to build this within our own families. By adopting our mindset and good spending habits, we can begin to set up college savings plans and down payments for homes like any other.

Photo credit: digitalskillet / iStock,