Photo: Nappy.co / Alyssa Sieb @alyssasieb
About 56 percent of Black Americans currently have life insurance, and the numbers have been slowly increasing in recent years. However, 75 percent of Black Americans want life insurance, so it’s clear that many are still in need of affordable, adequate coverage.
On top of the coverage gap, Black Americans have a higher mortality rate than any other race in the United States, which increases the need for life insurance to protect Black families’ financial security in the event that the main provider dies.
Unfortunately, Black Americans are more likely to be concerned about financial security, including the ability to pay their bills. Although life insurance might add another expense to the list, Smart Life Insurance and our partner Generational Science are working together to help you find an affordable policy that provides the right coverage for you.
One strategy for cutting long-term life insurance costs and ensuring you have the proper death benefit for your needs is combining term and whole life insurance policies. Get more information about this life insurance method below.
Term life insurance is a non-permanent policy that provides coverage for a certain period, typically between 10 and 30 years. However, some companies provide shorter terms that can be used to ensure the payment of short-term expenses, such as credit cards, when you die. On the other hand, term life insurance policies are flexible enough that you could also use them to cover long-term expenses, such as mortgages.
Since term life insurance is flexible and typically less expensive than permanent life insurance, it can be useful to cover the years in which the policyholder must support others financially. For example, a parent could use term life insurance to make sure their children are financially supported if the policyholder dies during their working years.
In addition, term life insurance is one of the simplest forms of life insurance. You don’t need to make investment decisions or manage your policy very often. In general, all you need to do is choose an insurer, decide how much coverage you want, and then pay your premiums.
While many Black Americans have life insurance, many are underinsured, so their policies often only cover funeral expenses. In contrast, a term life insurance policy could provide higher death benefits that greatly improve the beneficiaries’ financial situation. Over time, term life insurance could help close the racial wealth gap.
Whole life insurance is a permanent life insurance policy that may be combined with other benefits. In many cases, a whole life insurance policy has level premiums and death benefits, meaning your premiums won’t increase, and your death benefit won’t decrease.
A whole life insurance policy includes cash value, which grows depending on your premiums. Part of the premium will go toward the cost of the policy, while the rest will go into your cash value account, which grows tax-deferred. Therefore, you won’t have to pay taxes on the money until you withdraw it from your account.
The cash value of your policy could also be used for retirement or unexpected expenses. When you withdraw the money, you can either pay it back or have it deducted from your death benefit. Some companies will also pay dividends, which you can accept as cash, or you can reinvest them into the cash value of your account.
The benefits of whole life insurance for Black Americans are similar to those of term life insurance. However, whole life insurance can also improve the policyholder’s financial situation during their lifetime if needed. Therefore, borrowing from the policy’s cash value during times of need could help improve the family’s finances sooner.
Combining term and permanent life insurance may also be known as policy stacking. Policy stacking occurs when individuals use more than one life insurance policy as part of their financial strategy.
Using both term and whole life insurance policies requires that you assess your financial needs more often to determine how much coverage you need. For example, if you still have financially dependent children, you will need a higher death benefit than if your children have grown up and can support themselves. Reviewing your finances for insurance purposes helps you make better financial decisions overall.
In addition, if you understand how much coverage you need, you won’t be overpaying for an unnecessary policy. Since whole life insurance is a permanent policy, you could purchase a policy with a smaller death benefit to take advantage of the investing benefits. Then, you can use term life insurance to supplement the whole-life death benefit during the years when you need the most coverage. Then, you could choose to not renew your term life insurance policy later to save money.
For example, if you need a $1 million death benefit while you have dependent children, you could purchase a $500,000 whole life insurance policy and a $500,000 term life insurance policy. If you purchase these policies while you are in your 30s, the whole life insurance policy would last until you die, but the term life insurance policy could end after 10 or 20 years.
Using the example above, a $500,000 whole life insurance policy for a 30-year-old male might cost around $22,840 for 40 years. A 10-year term life insurance policy with a $500,000 death benefit might cost around $2,160. In total, you would pay around $25,000. On the other hand, if you just purchase a $1 million whole life insurance policy, you might pay $31,677 over 40 years, even though you don’t need a death benefit that large after your children have their own income.
Unfortunately, life insurance tends to be misunderstood by many Black Americans, especially in terms of cost. On average, Black Americans believe life insurance to be 30 percent more expensive than white Americans do. Use the charts below to get a better understanding of what you might pay for term and whole life insurance.
Below are the average annual life insurance rates for a 10-year term policy:
| Age & Gender | Average Rate for a $250,000 Death Benefit | Average Rate for a $500,000 Death Benefit | Average Rate for a $1 Million Death Benefit |
| 30-year-old male | $132 | $216 | $312 |
| 30-year-old female | $132 | $180 | $264 |
| 40-year-old male | $192 | $276 | $420 |
| 40-year-old female | $168 | $264 | $336 |
| 50-year-old male | $324 | $564 | $972 |
| 50-year-old female | $300 | $432 | $756 |
| 60-year-old male | $768 | $1,392 | $2,676 |
| 60-year-old female | $528 | $948 | $1,800 |
| 70-year-old male | $2,292 | $4,368 | $7,596 |
| 70-year-old female | $1,440 | $2,544 | $4,500 |
Below are the average annual whole life insurance rates for a $1 million policy:
| Age | Average Rate for Males | Average Rate for Females |
| 30 | $791.94 | $666.94 |
| 40 | $1,224.72 | $1,003.06 |
| 50 | $1,985.28 | $1,615.00 |
| 60 | $3,405.56 | $2,726.11 |
| 70 | $4,916.67 | $4,772.28 |
Combining term and whole life insurance can help you save money in the long run. Instead of purchasing an expensive permanent policy with a high death benefit, you could buy a more affordable policy with a smaller death benefit. When you need more coverage, you can purchase one or more term life insurance policies to stack the death benefits.
In order to combine term and whole life insurance in a beneficial way, you need to be aware of your financial situation. You will need to plan what policies to buy and when to buy them by determining how much coverage you need in the present and the future.
If you want to take full advantage of stacking life insurance policies, it’s better to start earlier rather than later. However, Smart Life Insurance can help Black Americans find affordable life insurance policies regardless of their financial strategy.
Fill out our form to contact a licensed insurance professional and get life insurance for as low as $30 per month.
