Black Americans lag behind whites in the amount of investment they make in life insurance policies and this can have consequences such as people dying in debt and passing that debt on to their relatives. But given the Black-white mortality rate gap, it would seem that investing in reasonably priced life insurance policies could be one unique area in which Black Americans have a systemic advantage over white.
There needs to be more of an understanding of life insurance policies and how they work. A 2020 Haven Life survey found that Black American respondents without insurance policies thought the cost of coverage was 30 percent higher than white respondents without life insurance did. Due to this, many Black people take out smaller policies even though more Black people have life insurance.
Eight in 10 of the Black Americans surveyed by Haven Life reported having life insurance individually or through work, compared with seven in 10 white respondents.
Due to racial disparities in mortality, Black Americans die younger than white at almost every age, reported The Marshall Project. Having life insurance would benefit the Black community more.
Communities with relatively high mortality rates should be more incentivized to have life insurance coverage and high levels of coverage. Not only would this ensure covering the debts of the deceased but life insurance investment could also be used as a tool to grow wealth.
Here are 13 facts and numbers on the Black-white mortality rate gap.
Life insurance policies don’t have to be used to only bury the dead. They can be used to build wealth.
“For decades, it was a standard practice at some insurance companies to charge Blacks more for products and offer them small face amount burial insurance that provided little value for the premium paid. These practices led to litigation and settlements that were resolved not that long ago,” Judy Hopkins, head of legal at Haven Life, told Forbes.
Over time, many permanent life insurance policies offer the potential to accumulate cash value, according to Prudential.com. You could use them, for example, as extra retirement income. You can also access the money to pay for medical costs, among other things.
More and more Black people are viewing life insurance as a way to pass on generational wealth. A new survey from Haven Life found that 22 percent of Black people value life insurance as a way to pass along generational wealth, compared to 8 percent of white respondents.
Eugene Mitchell, corporate vice president and African American market manager at New York Life Insurance Co., told Black Enterprise he wants the Black community to use policies to create multigenerational wealth, keep assets like homes and businesses, and amplify their nest egg for retirement, to name a few benefits.
Depending on your race and your zip code, life insurance companies have charged higher rates for Black families. This is prohibited but often resulted in Black families taking out lower valued life insurance policies, Nerd Wallet reported.
Although there is a move for Black Americans to view life insurance as a way to build wealth, especially given the high mortality rates, many still see life insurance as mainly a burial payment.
Dwain Phelps, owner of Phelps Financial Group in Kennesaw, Georgia, said he’s come across the mindset of life insurance as burial insurance among many of his Black clients, particularly those who are baby boomers.
“I just had a client recently who basically said, ‘I’m not trying to leave my children a lot of money. They’re very successful. They’re taking care of their children. I just want enough life insurance to bury me,’” Phelps told Forbes. Phelps himself carries $2 million in life insurance coverage.
The median value of life insurance policies held by Black American respondents is $50,000 compared to a median coverage amount of $150,000 among whites, according to the Haven Life survey.
And 37 percent of Black American respondents said they believe the purpose of life insurance is to shield their families from unpaid debt, compared with 64 percent for whites.
“Particularly in African-American communities, life insurance most definitely is misunderstood,” Phelps said.
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There are various things that should factor into the cost, such as age and health.
“To me, life insurance is a tool. You have to use it to address the issues and sometimes the desires,” Crawford Mickey McGill, a private wealth advisor with Ameriprise Financial Services in Houston, told Forbes. “We definitely want to take care of our needs. But you have the ability to take care of your wants for not much more [money].”
To estimate how much life insurance you need:
1. Add up financial obligations you want to cover (income replacement if you were to pass away, a mortgage, other debts, children’s college costs)
2. Subtract assets that your family could use for those expenses (such as savings and existing life insurance)
3. The difference is your life insurance need
There are two major types of policies. Term life insurance provides a payout only if the policyholder dies during the term of the policy. Since term life insurance does not have any cash value, you can’t take a loan against the policy.
There’s also permanent life insurance, which pays a death benefit whenever the insured person dies. But it can also have cash value that you can access through a loan or withdrawal.
The gap between Black and white life expectancy was closing when the pandemic hit. From 1990 to 2018, the Black–white American life expectancy gap fell 48.9 percent, according to a study entitled “Inequality in mortality between Black and White Americans by age, place, and cause and in comparison to Europe, 1990 to 2018.” If this rate had continued, the racial gap in life expectancy would have closed by 2036. But with Black Americans being disproportionately affected by coivd-19 deaths, the gap has once again widened.
One in five African American deaths happens earlier than if they were white, according to The Marshall Project. Black Americans die younger at almost every age. Over 72,000 more Black Americans died at younger ages in 2019.
Black infants had more than twice the mortality rate of white infants. In 2019, almost 3,600 more Black babies died before their first birthday, according to The Marshall Project.
Life insurance policies can be taken out on your child, even when it is an infant.
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Racism can be linked to issues that affect health, such as less access to healthy food, water and public spaces as well as environmental damage; overpolicing and disproportionate incarceration.
Poor health care is a major issue. Black Americans receive less and lower-quality care for conditions such as cancer, heart problems, pneumonia, pain management, prenatal and maternal health, and overall preventive health, according to research.
The National Center for Health Statistics (NCHS) data shows that white Americans’ life expectancy declined by 1.2 years in 2020, largely due to covid. For Black Americans, that number was 2.9 years, Brooking Institution reported.
There is a lower emergency response to Black neighborhoods, studies have found.
A study published in Health Affairs examined the role of emergency department (ED) crowding and ambulance diversion for Black and white people. It found that ambulance response is longer when dispatched to Black neighborhoods than white. When Black patients enter the emergency department, they tend to have longer waits. This means that their health issues are not taken care of as quickly.
According to the Centers for Disease Control and Prevention, Black people account for 22.1 percent of the U.S. covid-19 deaths despite only comprising 12.8 percent of the population. This caused a spike in Black Americans’ overall mortality rates.
Black and white adults age 65 to 79 experienced mortality declines in high- and low-income areas in 2018, but the gap never closed. White Americans had an overall mortality rate of 27 deaths per 1,000 people. Black Americans in low-income areas had a mortality rate of 32 deaths per 1,000 people.
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Photo: Photo by Pavel Danilyuk: https://www.pexels.com/photo/a-woman-standing-near-the-coffin-7317889/
