African Americans and Life Insurance
Written by Dereck L. Smith JR, LUTCF
Secure Heights Financial, Inc. Financial Advisor



It is a sad truth that 78 percent of African Americans and Hispanic Households do not have Life Insurance. (*1)

Have African-Americans been neglected, in 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 have long gone. Yet in many ways, this interaction still has a chilling affect on many in the African-American community. At one time, life insurance in the African-American community became known as "burial insurance." African-Americans were allowed only to buy a small policy to bury themselves 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 coverage. However, today underwriters of life insurance are not allowed to know the race of individuals applying for insurance.

Present day in our African-American communities, some still have the "burial insurance" mentality towards life insurance. Yet many African-Americans have changed their views, and have enough insurance to pay off their homes and to bury them. Through careful marketing in the late sixties and early seventies, African-Americans were steered towards buying additional life insurance when purchasing a home. It seems creditors wanted to make sure as African-Americans moved into homes, that their investment in the mortgage would be paid off in the event of a premature death.

If African-Americans have been buying life insurance for a death benefit or ‘mortgage protection’, how are we being neglected? There still seems to be a lack of financial planning and insurance knowledge within our community as a whole. Unfortunately, some African-Americans' life insurance policies are so similar, that you would think they were lined up in the room to buy it. Some insurance agents try to sell ‘one size fits all’ plans to African-Americans instead of educating them and addressing their personal needs.  Purchasing life insurance should be based on your particular goals, keeping your family obligations in mind.  It is all about education in the African-American community, especially when it comes to life insurance.

As some African-Americans found new avenues of success in their careers, thanks in part to the civil rights movement, many have changed their views. The "burial" and "mortgage protection" attitudes towards life insurance were replaced.

Life insurance has become a tool to accomplish the following:

1.      Pay off all debt

2.      Provide income to the spouse and children left behind

3.      Set up a  trust to leave money to their church or organization

4.      Pay for children’s higher education including college, in the event of a death

5.      Keep key employees from leaving current employment

6.      Buy out children not involved in the family business
 

While a change in attitude towards life insurance has been an accomplishment; we still have a long way to go. It is time that we all take financial responsibility for our actions. Otherwise, we will continue to have a community where children are orphaned due to the lack of proper life insurance or the spouse has lost their home, because they could not afford the mortgage. You have to be able to look past this year, $30,000 may take care of your child for a couple of years, but Social Security will not pay the full cost of raising a child.  It is evident that many in our community will spend $500 on a car note, $150 for a pair of shoes or $200 for a purse, but do not have enough life insurance to feed, clothe, or send their children to college, as well as provide income for their spouse if they die. While some echo, "I do not want to leave my family rich", it is better to leave your family rich than poor. 

If you would like a complimentary consultation visit www.SecureHeights.com or call us at (281) 657-7363

(*1) The Federal Reserve Board’s Survey of Consumer Finance