We surveyed black and white consumers to learn if there are racial differences in how they perceive and buy life insurance. (Spoiler: It exists.)
For most of this year, protests have taken place across America to take a stand against the murder of unarmed black people. Conversations about racial errors have also included other areas of inequality, such as economic inequality. Research shows that black American households have a median income of 61% of white households, and white families have a net worth ten times higher than black families, indicating a significant racial wealth gap in our country. But at Haven Life, we found ourselves wanting to know: does this gap translate into life insurance coverage as well?
As part of Life Insurance Awareness Month, we sat down to understand how black and white individuals view life insurance and how that perception may play a role in the racial wealth gap. The national survey examined adults between the ages of 18 and 60 who identified themselves as black or white, the median age being 34 years.
The study showed that black Americans are more likely to think of life insurance as a way to convey generational wealth. . It also found that black respondents with life insurance have significantly less coverage than white respondents have.
In this article:
Black respondents are more likely to have life insurance
Both black respondents (62%) and white respondents (61%) believe that their death would have a "significant" impact on the family's finances future. But black respondents are a little more likely to buy a life insurance policy – 8 out of 10 black people said they have life insurance through work or individually, compared to 7 out of 10 white people who said the same thing.
Eight out of ten black respondents have life insurance through work or individually, compared with 7 out of 10 white people who said the same
Black respondents have a third of the coverage
In this study, both black and white respondents had similar median incomes, but the coverage for black respondents was significantly lower.
The median income for black surveyors was $ 50,162 and $ 54,823 for white surveyors. However, white respondents had a median coverage of $ 150,000, while black respondents reported having only $ 50,000 in coverage.
Experts say that a good rule of thumb is to have five to ten times your annual income in a life insurance policy. Based on that, both groups are underinsured. But black Americans surveyed have only a third of the coverage for white respondents, which is significantly less than recommended. Ultimately, more research is needed to draw a definitive conclusion as to why that gap exists.
With that said, a look at the history of life insurance can provide some clues as to why a difference may exist. From the end of the 19th century, some insurance companies offered fewer benefits at a higher cost to black people. When companies encountered pushback on race-based methods, some chose to avoid selling entirely to black people. The use of race as a factor in determining benefits and premiums ceased in the years following the Civil Rights Movement, and some black policyholders were granted resettlement in the early 2000s after initiating legal discrimination. However, restricting access to a financial service can still have current consequences. A study by the TIAA Institute on Financial Expertise showed that the nuances of how insurance works and how to calculate risk are topics that African Americans have less knowledge about, which can lead to them being underinsured, overinsured or overpaid for coverage.
White respondents with life insurance had a median coverage of $ 150,000, while black respondents reported that they only had $ 50,000 in coverage. To buy life insurance is to protect their families from unpaid debts, such as a mortgage. It was compared with 37% of black respondents who said the same.
Black respondents (22%) were almost three times more likely than white respondents (8%) to believe that life insurance is needed to "build generational wealth." One possible reason for this difference in life insurance perspective may be the racial wealth gap, with white families having a median value of $ 171,000 compared to $ 17,600 for black families. For black respondents, buying life insurance can be a way to reduce this gap.
In addition, homeownership is a hallmark of the American dream and is seen as one of the keys to building wealth. But research shows that black Americans are less likely to own a home – the Urban Institute recently reported that 71.9% of white Americans own a home, compared to just 41.8% of black Americans. The Urban Institute also notes that, on average, the first home a black American buys is valued at $ 127,000, compared to $ 139,000 for white Americans, and they are more likely to buy homes later in life. Because there are ways in the way of accumulating wealth, some may look at life insurance as a way to leave a nest egg for the next generation.
Black respondents (22%) were almost three times more likely than white respondents (8%) to believe that life insurance is needed to "build generational wealth"
Both black and white respondents overestimate the cost of life insurance
It is makes sense that if you do not have life insurance you may not know what it actually costs. And it turns out that of those who do not have life insurance, black respondents believe that the average cost of insurance is 30% higher ($ 65 per month) than white participants ($ 50 per month).
Despite the high perceived cost, 41% of black respondents say they "plan to buy life insurance" compared to 19% of white respondents who said the same. When they do, they will experience the good kind of sticker shock, because when that happens, a healthy 34-year-old woman can buy a $ 250,000 20-year life insurance policy for as little as $ 16 a month.  As the survey shows, there is in fact a life insurance gap for black and white Americans. The amount of coverage for black respondents is after that for white respondents and the fact that they are underinsured gives black families less financial cushion after a loved one passes.
How do we as an industry responsibly and effectively help black Americans secure the right amount of financial protection? Firstly, representation is important, which is why we at Haven Life are committed to building a diverse team that serves the industry from different perspectives. We must also use our platforms and marketing channels to expand access to educational tools and content. Although we do not have all the answers yet and realize that a lot of work must be done to reduce the insurance difference between life insurance policies, we are dedicated to being part of the solution.
Survey Methodology: Haven Life conducted a quantitative survey between 17 and 26 August 2020 and collected N = 653 completed responses. The respondents had to be between 18-60 years old and identify as either only black (N = 264) or only white (N = 389). The respondent's median age was 34.
Our Editorial Policy
Haven Life is a customer-centric life insurance agency supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and general well-being can be refreshingly easy.
Our Editorial Policy
Haven Life is a customer-centric life insurance agency that is supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and your general well-being can be refreshingly easy.
Our content is created for educational purposes only. Haven Life does not support the companies, products, services or strategies discussed here, but we hope they can make your life a little less difficult if they suit your situation.
Haven Life is not authorized to provide tax, legal or investment advice. This material is not intended to provide and should not be relied upon for tax advice, legal advice or investment advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
Haven Term is a term Life Insurance Insurance (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual. Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a simplified Life Insurance Policy Issue (ICC19PCM-SI 0819 in certain states, including NC) issued by C.M. Life Insurance Companies, Enfield, CT 06082. Numbers and functions for insurance forms and riders may vary by state and may not be available in all states. Our California agency license number is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best company as A ++ (Superior; top category 15). The rating is from Aril 1, 2020 and may change. MassMutual has received different ratings from other rating companies.
Haven Life Plus (Plus) is the marketing name of the Plus Rider, which is part of the Haven Term policy and offers access to additional services and benefits free of charge or at a discount. The driver is not available in all states and is subject to change at any time. Neither Haven Life nor MassMutual is responsible for the provision of the benefits and services made available under Plus Rider, provided by third party providers (partners). For more information about Haven Life Plus, visit: https://havenlife.com/plus.html