Paul Sanchez
Black individuals are more likely to have life insurance than white individuals, but they are also more likely to be underinsured. This is due to a variety of factors, including the fact that Black respondents overestimate the cost of life insurance, and that historically, life insurance was often sold to African Americans as burial insurance, which was cheaper but provided less coverage.
| Characteristics | Values |
|---|---|
| Percentage of Black respondents who have life insurance | 81% |
| Percentage of Black respondents who plan to buy life insurance | 41% |
| Percentage of white respondents who have life insurance | 70% |
| Percentage of white respondents who plan to buy life insurance | 19% |
| Median income of Black respondents | $50,162 |
| Median income of white respondents | $54,823 |
| Median coverage amount of Black respondents | $50,000 |
| Median coverage amount of white respondents | $150,000 |
| Black respondents' estimated average cost of life insurance | $65 per month |
| White respondents' estimated average cost of life insurance | $50 per month |
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What You'll Learn
- Black individuals are more likely to have life insurance than white individuals
- Black individuals are more underinsured than white individuals
- Black individuals overestimate the cost of life insurance
- Black individuals value life insurance more than white individuals
- Life insurance was historically sold to African Americans as burial insurance
Black individuals are more likely to have life insurance than white individuals
There are a number of reasons why Black individuals may be more likely to have life insurance. One reason could be that Black individuals value the idea of life insurance more than white individuals, seeing it as an important component for building generational wealth. This is in contrast to many White Americans who already have amassed compound wealth to pass down to their heirs.
Another reason could be the close-knit relationship between the Black community and life insurance companies. For example, at least 60% of middle-market African Americans (those 25 to 64 making $35,000 to $100,000 per year) have a life insurance contract, compared to just 46% of the general middle-market population. Additionally, over 70% of African Americans believe strongly that individuals and families should purchase life insurance, compared to less than half of the general population.
However, it is important to note that despite being more likely to have life insurance, Black individuals are far more underinsured than whites. This is because Black individuals do not purchase nearly as much coverage as white individuals, even though their median incomes are similar. For example, white individuals have a median coverage amount of $150,000, while Black individuals report having only $50,000 in coverage. This means that in the event of a claim, Black individuals may not have adequate financial protection.
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$19.95
Black individuals are more underinsured than white individuals
Although Black individuals are more likely to have life insurance, they are far more underinsured than whites. Eighty-one per cent of Black respondents to a survey indicated they have life insurance, compared to 70 per cent of white respondents. However, when it comes to the amount of coverage, Black individuals report having $50,000 in coverage, while white individuals state they have a median coverage amount of $150,000.
This disparity in coverage amounts is despite the fact that median incomes for the Black and white survey respondents are similar. Black respondents earn $50,162 and white respondents earn $54,823. Based on the calculation that adequate life insurance coverage should be 5 to 10 times the amount of a person's income, both Black and white survey respondents do not buy enough life insurance coverage, but Black respondents are substantially more underinsured.
There are several reasons why Black individuals may be more underinsured than white individuals. One reason could be the historical discrimination in the life insurance industry. After the Civil War, insurers began classifying Black people who were former slaves as higher mortality risks, resulting in higher premiums or denial of coverage. These practices continued into the 1960s, with separate sets of rates for Black and white applicants. While some states banned race-based underwriting, many insurers simply moved their business elsewhere, reducing access to coverage for Black individuals.
Another reason for the underinsurance of Black individuals could be the perception of higher costs. Black respondents to surveys substantially overestimate the cost of life insurance. Of those who do not have life insurance, Black respondents believe the average cost is 30 per cent higher ($65 per month) than white respondents ($50 per month). Despite this perceived higher cost, 41 per cent of Black respondents said they plan to buy life insurance, compared to only 19 per cent of white respondents. This suggests that Black individuals value the idea of life insurance more than white individuals, considering it an important component for building generational wealth. However, this value does not translate into purchasing sufficient coverage, resulting in higher levels of underinsurance among Black individuals.
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Black individuals overestimate the cost of life insurance
Although Black individuals are more likely to have life insurance than white individuals, they are also more likely to be underinsured. This is because Black individuals overestimate the cost of life insurance. Black respondents believe the average cost is 30 per cent higher ($65 per month) than white respondents ($50 per month). This perceived higher cost means that Black individuals do not purchase as much coverage and are subsequently more underinsured.
Black individuals also tend to have lower incomes than white individuals, which means they are less able to afford adequate life insurance coverage. Adequate life insurance coverage should be five to ten times the amount of a person's income. Based on this calculation, both Black and white survey respondents do not buy enough life insurance coverage, but Black respondents are substantially more underinsured.
There is a close-knit relationship between the Black community and life insurance companies, with at least 60 per cent of middle-market African Americans (those 25 to 64 making $35,000 to $100,000 per year) having a life insurance contract, compared to just 46 per cent of the general middle-market population. Over 70 per cent of African Americans believe strongly that individuals and families should purchase life insurance, compared to less than half of the general population. African Americans often see life insurance as one of the building blocks for passing down wealth to the next generation, which is in contrast to many White Americans who already have amassed compound wealth to pass down to their heirs.
Historically, life insurance was often sold to African Americans as burial insurance – smaller, cheaper policies that cover the bare minimum. After the Civil War, insurers began classifying Black people who were former slaves as higher mortality risks, meaning they were charged more or denied coverage altogether. These practices stretched into the 1960s, with separate sets of rates for Black and white applicants. Some states banned race-based underwriting, but many insurers simply took their business elsewhere, reducing access to coverage and segregating the industry.
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Black individuals value life insurance more than white individuals
There is a close-knit relationship between the Black community and life insurance companies, with at least 60% of middle-market African Americans having a life insurance contract, compared to just 46% of the general middle-market population. Over 70% of African Americans believe strongly that individuals and families should purchase life insurance, compared to less than half of the general population.
However, despite being more likely to have life insurance, Black individuals are far more underinsured than whites. This is because they do not purchase nearly as much coverage. For example, white individuals have a median coverage amount of $150,000, while Black individuals report having $50,000 in coverage. This is because Black respondents substantially overestimate the cost of life insurance. They believe the average cost is 30% higher ($65 per month) than white respondents ($50 per month).
Historically, life insurance was often sold to African Americans as burial insurance – smaller, cheaper policies that cover the bare minimum. After the Civil War, insurers began classifying Black people who were former slaves as higher mortality risks, meaning they were charged more or denied coverage altogether. These practices stretched into the 1960s, with separate sets of rates for Black and white applicants.
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Life insurance was historically sold to African Americans as burial insurance
Despite being more likely to have life insurance, Black individuals are far more underinsured than whites. A survey found that Black respondents believe the average cost of life insurance is 30% higher than white respondents. This perception of higher cost may contribute to the underinsurance of Black individuals, as they do not purchase as much coverage as their white counterparts.
There is a close-knit relationship between the Black community and life insurance companies, with a higher percentage of middle-market African Americans having life insurance contracts compared to the general middle-market population. This may be due to the fact that African Americans often see life insurance as a building block for passing down wealth to the next generation, in contrast to many White Americans who have already amassed compound wealth.
However, it is important to note that Black individuals do not always purchase enough life insurance coverage. Adequate life insurance coverage should be 5 to 10 times the amount of a person's income, and both Black and white survey respondents were found to be underinsured based on this calculation.
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Frequently asked questions
Black individuals are more likely to value the idea of life insurance and consider coverage to be an important component for building generational wealth.
Black individuals are more likely to be sold smaller, cheaper policies that cover the bare minimum.
81% of Black respondents indicated they have life insurance, compared to 70% of white respondents.
