It’s probably crossed your mind a few times why on earth you need life insurance. Like in actual fact (Eerr maybe not a fact), the benefits only come when you die and you’ll be dead, right? So why care?

As far back as the 1800s, some Black people have associated life insurance primarily with just one thing - paying for final expenses or better put, funeral costs. This ideology did not begin to wind down until the 21st century. But hey! You need to drop that old-fashioned thinking and start seeing life insurance as more than just something you should be buried with. Generally, having the right amount of life insurance can help beneficiaries cover costs like living expenses or debts. And you might want to agree with us that given the COVID-19 pandemic, this safety net perhaps feels all the more necessary.  Well if you don’t agree with us, you could go drop your arguments with the Life Insurance Marketing and Research Association (LIMRA) that recently found that nearly 30% of adults are more likely to buy life insurance in 2021 compared to their tendency to buy it pre-pandemic.

Now to the Black community and life insurance industry saga.

There's been a sizable coverage gap with life insurance between Black and White Americans as a result of discriminatory practices affecting the way life insurance was sold to the Black community. So yes, life insurance can be essential for protecting your family financially in case of a tragedy but many black people go without it. Some financial advisors wrongly assume that there’s little wealth in the Black community and as a result do not market life insurance and other financial products to Black people, leaving them underinsured. Can you imagine that?

Well newsflash, Black Insure is here to the rescue.

Yes, black people need life insurance in 2021.

Here are the top 10 reasons.

Let’s dive right in.

A LITTLE BACKGROUND STORY

Yes, we just promised to dive right in, but we couldn’t resist the urge to tell you this story. Really short, we promise.

Black Americans typically have one-third of the coverage of their white counterparts, according to a 2020 study by an insurance company. According to history, life insurance was sold to black people as final expense insurance which essentially covered the least bit, funeral and burial costs. But Why?

Oh well, it all started after the civil war when the Black community (who were former slaves) were regarded, by insurance companies, as a group of people with higher death rates. This resulted in the black people having to pay more premiums or not have access to coverage at all. The insurers discriminated, and created different sets of rates for Black and white applicants, even into the 1960s. There was also a reduction in access of black people to medical care, housing, and education, all leading to an increased cost of life insurance.

The aftermath? Black people weren’t able to protect their assets and loved ones or pass down generational wealth, for a long time.

HOW LIFE INSURANCE WORKS

In plain terms, Life insurance acts as an important financial safety net whether or not you were to pass away suddenly.  There are two types;

Term Life Insurance Policy

Also known as temporary policy, comes well-recommended by financial experts because of its simplicity and affordability. It is a worthwhile life insurance plan that covers your family for a period, which typically ranges from 10 to 30 years at 5-year increments.  This insurance plan, in particular, provides coverage at a budget-friendly price during the years your financial dependents need it most.

How it works is you pay premiums every month or year for the duration of your term length and get financial protection for your family in exchange. This kind of coverage provides a payout, called a death benefit, to your beneficiaries only if you die during the term of the policy. The proceeds from the death benefit can be used to help pay for financial needs – those that come with death, such as funeral arrangements and other end-of-life expenses, along with day-to-day bills like the mortgage and child care.

But how do you get to pick term length?

This is pretty simple. All you need to do is use our online life insurance calculator to get our recommendation on a coverage amount and term length that may best fit your financial responsibilities. This calculator will also tell you if you need term life insurance or not, considering your age, income, family structure, and so on.

So what happens once the term length is over?

Well, coverage ends. And no, you don’t get back the premiums paid.

So my money becomes a waste?

Well, would you rather have affordable coverage in place to keep you prepared for the unexpected, or leave it to chance?

Exactly, we thought so too.

And Oh! You must note that you can't take a loan against this policy as it does not have any cash value.

Whole Life Insurance Policy

Also known as a permanent policy, is a type of insurance that covers you for the entirety of your life and is more expensive than term life insurance which covers for just about 30 years. According to one estimate finding, whole life insurance is 5 to 20 times more expensive than term life insurance. This kind of coverage pays a death benefit whenever the insured person dies and includes a cash value component that can grow over time and be borrowed against or used to cover future premium costs or supplement your financial planning needs.

Term Life VS Permanent Life Insurance Policy

Catch the difference between both insurance policies at a glance.

So which is right for you? Well, it all depends on your personal preferences and budget for life insurance. A permanent policy generally costs much more than term life insurance because of the lifelong coverage and the fact that it has a cash value, and as such if you seek a lifelong coverage or a product that has a cash value, you should buy a permanent policy. And if, of course, you don’t mind paying higher premiums. On the flip side, if you need affordable coverage to protect your financial dependents for a set term, or coverage to help your partner pay your mortgage and other bills, then life insurance might be a good choice.

TOP 10 REASONS BLACK PEOPLE NEED LIFE INSURANCE

1. TO PAY FOR FUNERAL AND FINAL EXPENSES

This reason is top on our list because burial costs and final expenses rank the top reason that black people buy life insurance according to a 2020 survey carried out by industry-funded groups LIMRA and Life Happens.

Let’s face it, funerals are expensive. As of 2019, the national median cost of a funeral that included viewing and burial was $7,640, and this is not even talking about extravagant funeral services. You might want to take the financial burden off your folks and have them not dip into their savings or use credit to fix your burial costs. Your demise alone would be enough emotional burden for them, don’t you think? Right. So get that life insurance. Some insurers offer final expense policies. These policies have low coverage amounts and relatively inexpensive monthly premiums.

2. TO BUILD GENERATIONAL WEALTH

It’s true, homeownership seen as one of the keys to building wealth is not in the favor of the black community. The Urban Institute has reported that 71.9% of white Americans own homes, compared to just 41.8% of Black Americans. This shows black people are less likely to own homes. And so you think you have no assets to pass to your heirs? Have a re-think, because life insurance’s got you.

You definitely can create an inheritance by buying a life insurance policy and making your heirs beneficiaries. This will set them up for any monetary needs that might come up in the future. By the way, this reason ranks second according to the same study carried out by LIMRA and Life Happens mentioned above.

3. TO PROTECT FAMILY AND LOVED ONES

The need to provide loved ones with financial security has heightened since the COVID-19 pandemic. A recent LIMRA survey found that 44% of households said they would face financial hardship within six months if the primary wage earner were to die prematurely, with 28% of Households hitting financial hardship within a month.

If your loved ones depend on your financial support for their livelihood, then buying life insurance coverage is worth it, because it replaces your income when you die. You should buy a policy size sufficient enough not to have the people who depend on your income worry about their living expenses or other major costs. Experts recommend life insurance that's equal to 7 to 10 times your annual income.

4. TO PAY OFF DEBTS AND OTHER EXPENSES

Debt can be a tremendous burden, on top of the already emotional toll your absence would create in the lives of your family. So, in addition to providing income to cover everyday living expenses, your family needs insurance to pay off any outstanding debts in full, like the mortgage, credit cards, car loans, or even private school loans. Life Insurance can help your dependents cover these debts. PAY DEBTS YOU LEAVE BEHIND.

5. TO SETTLE MEDICAL BILLS

Many life insurance companies offer extra benefits, known as riders, that you can add to your life insurance policy to enhance or adjust your coverage. Under some policies, for example, if you are diagnosed with a terminal disease and are expected to live less than 12 months, you can use your death benefit while you’re still living to pay for your care or other expenses.

In other words, critical illness plans give you money that you can spend on your treatment, and fund your household during your no-income period as you undergo treatment.

6. TO MANAGE BUSINESS

Did you know you could use a life insurance policy as collateral to secure a small business loan? The death benefit on your policy will go toward paying off the entirety of the loan in the event of your death, and then the remaining amount will be paid to your beneficiaries. That’s simply how it works.

Also, have you ever considered what will become of your business when you are gone? You certainly can’t let the business you’ve worked so hard to build go down to ruins. You need a succession plan to determine who would inherit your business, and also ensure your employees and key stakeholders still get paid in your absence. A life insurance plan would definitely come in handy, you can speak to a financial advisor to get you on track to help you create one.

7. TO SUPPLEMENT RETIREMENT INCOME

Fortunately, life insurance helps black people generate income over time for retirement from the cash value built up. It works in form of an annuity which is like a DIY pension plan — you put an amount of money into a life insurance product and in return, you get a guaranteed stream of income month after month, for as long as you live. This allows you to keep your head high and live your life on your terms, free from work and pressures like retirement should be. Sounds good, right?

8. TO HELP WITH FINANCIAL SECURITY AND  A TOOL FOR FORCED SAVINGS

Putting money aside can honestly be very challenging, and even if you managed to put some money aside, situations arise that can have you spend the money you had put aside, leaving you with zero savings. One reason black people need life insurance is that it can mitigate for lack of savings after you die. Many policies have cash value, which creditors dare not touch even in case of bankruptcy.

Life insurance, considered a financial asset, can also help increase your credit and help you to get a loan or health insurance.

9. TO GIVE TO CHARITY

Do you want to be remembered for blessing lives even long after you're gone? Life Insurance can help you leave a lasting gift for a cause you want to support or charity that is much larger than you would otherwise set aside for donation.

10. TO HAVE PEACE OF MIND

We could mention a truckload of reasons why black people need life insurance, but it’s all summed up under peace of mind.  While there's no monetary value on peace of mind, for many, knowing you've put financial protections in place for your family is everything.

Having life insurance certainly provides the ultimate peace of mind.

HOW MUCH LIFE INSURANCE BLACK PEOPLE NEED

It’s not always obvious how much life insurance is enough, but there are ways to calculate the right amount of coverage to ensure you are not underinsured as it has been found with black people. If people rely on you financially, you may want a large payout to support them for multiple years after you die. Alternatively, if you don’t have any financial obligations or dependents, you may not need coverage at all.

You certainly do not need a math degree to figure out how much life insurance you,  just a basic knowledge of additions and subtractions will get you there. A simple equation is:

Your life insurance need = [Financial obligations you want to cover] – [existing assets that can be used toward expenses]

Financial obligations you want to cover include income replacement, mortgages, other large debts, children's tuition money while existing assets that can be used toward expenses include savings, funeral expenses (if it isn’t part of a large policy)

Alternatively, you could use a financial advisor or insurance agent or a free online calculator like ours to help you estimate how much life insurance you need. Generally, the life insurance industry says a good rule of thumb is to have 5-10 times your annual income in a life insurance coverage. You must also figure out what type of coverage to buy whether permanent or temporary.

THE BOTTOM LINE

Is life insurance worth it for black people? The answer is simple. Yes, life insurance is worth it — especially if you have loved ones who rely on you financially.

Though there is a diversity vacuum in the financial services industry, for example with Black people representing less than 4% of certified financial planners in the U.S. but making up nearly 30% of the U.S. population, it shouldn’t deter Black Americans from buying life insurance or adding to their existing coverage. Let’s close the gaps in the ownership of life insurance among the black community.

So, what next?

If helping your beneficiaries cover certain expenses that might crop up in the event something happens matters to you, make a plan to research coverage options, identify your life insurance needs, and get life insurance as soon as possible.

Mind you, if you buy life insurance this week, more like right now, you'll save more. No, this is not some sales pitch or a false sense of urgency. It's simple math.

You may want to act now. We’ll tell you a secret... YOU CAN GET COVERAGE RIGHT AWAY!

Ready?  Or do you need more clarifications with the next steps to take? Let’s help you.  All you need to do is reach out for professional assistance and let’s get started.