African Americans and Life Insurance

Have African-Americans been neglected, when it comes to understanding the need for life insurance? What has shaped African-Americans viewpoints towards life insurance, and what can be done to change some of these misconceptions?

The days of the debit insurance agent chasing your grandmother to collect the 10 cent premium are long gone. Yet in many ways, this interaction may be still affecting many within the African-American community. At one time, the sale of life insurance in the African-American community amounted to be nothing more than "burial insurance." African-Americans were allowed only to buy a small policy for burial, and this is how it was marketed to them. Yet many times, their Caucasian counterparts, who had the same type of insurance policy, paid less and were offered more life insurance coverage. However, life insurance underwriters are no longer allowed to discriminate on the basis of race.

Today, many African-Americans still possess the "burial insurance" mentality. On the other hand, other African-Americans buy enough life insurance to pay off their homes, cars, and other debts that may arise. Through careful marketing in the late sixties and early seventies, some African-Americans were convinced to buy additional life insurance when they purchased a home. It appears that creditors wanted to protect their property investments, as some African-American began to desire homeownership. At that time, some African-Americans found new avenues of success in their careers, thanks in part to the civil rights moment and their hard work ethic. They became doctors, lawyers, engineers, etc. These individuals found themselves approached by insurance agents who desired to enlighten them on the subject of life insurance. Their "burial" and "mortgage protection" life insurance attitudes were replaced. Life insurance became the following:

A means to pay off all debts
Provide income to the spouse and children left behind
To set up a trust to leave money to their church or organization
Pay for higher education including college, in the event of a premature death
A way to keep key employees from leaving their current employment
A vehicle to buy out children not involved in the family business

Unfortunately, other African-Americans have fallen into I have enough "life insurance at work trap." At work, if you are lucky, your company will provide you with life insurance that is equal to 2 or 3 times your salary. Is this really enough life insurance coverage to protect your family? At retirement or upon leaving the company, you will likely be able to convert a portion of the group life insurance policy into a whole life insurance or universal life policy and pay a premium at your attained age. If you are currently paying $5 per month, for group life insurance, you will be paying a much higher premium for life insurance coverage at retirement or upon separation from your company. For example, if you are a sixty-five year old male, a $100,000 life insurance policy might cost you $469, per month. Also, sometimes you are allowed to keep a life insurance amount that is one times your salary, at retirement; however, this amount may be cut in half by age 68 and level off at $10,000 by age 70. It sounds unfair, but this is reality.

If African-Americans have been buying life insurance for a death benefit or "mortgage protection," then they have been neglected, in my opinion. Unfortunately, when I sold insurance as an agent, it was not uncommon to find similar face amounts (e.g., $10,000 face amount) among African-American families.

Individuals within the upper echelon of the African-American community seem to be more likely to use life insurance to better the lives of their families and businesses; they are more likely to have adequate life insurance and understand why life insurance is the building block of a good financial plan. However, there has not been a great transfer of financial planning and insurance knowledge from the African-American elite to others with the community, who may not be seen as the professional class. It is also unfortunate that some insurance agents try to sell insurance products to American-Americans, instead of educating them, so that they can educate others about these important subjects.

The African-American community must become more educated about life insurance. For many African-Americans, they turn to their ministers for guidance about insurance and financial planning. Hopefully their ministers have received the message and are willing to share their knowledge with all members. Otherwise, we will continue to have a community where children are orphaned because of poor life insurance planning. A $30,000 life insurance policy may take care of your daughter for a couple of years, and Social Security is not enough to raise a child. Some in the African-American community will spend $500, per month, on a car note, but do not you have enough life insurance to feed, clothe, or send your children to college, as well as provide income for their spouse if they die. While some may echo, "I do not want to leave my family rich;" it is better to leave your family rich than poor.

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