Is There a Life Insurance Race Gap?


For the greater part of this year, protests have taken place across America to take a stand against the killings of unarmed Black people. The conversations around racial injustice also have included other parts of disparity, for example economic inequality. Studies have shown Black American households possess a median income that's 61% of white households, and white families have a net worth 10 times higher than that of Black families, pointing to some substantial racial wealth gap in our country. But at Haven Life, we found ourselves wondering: performs this gap translate to life insurance coverage too?

As part of Life Insurance Awareness Month, we set out to know how Black and white individuals view life insurance and just how that perception might play in to the racial wealth gap. The nation's survey polled adults between 18 and 60 who recognized as White or black, using the median age being 34 years old.

The study found that Black Americans are more likely to consider life insurance in an effort to spread generational wealth. It also found that Black respondents with life insurance have substantially less coverage than white respondents do.

Black respondents may have life insurance

Both Black respondents (62%) and white respondents (61%) believe their death might have a “substantial” impact on their family's financial future. But Black respondents are slightly more likely to purchase a life insurance coverage – 8 in 10 Black people said they've life insurance coverage through work or individually, when compared with 7 in 10 white people who said exactly the same.

Black respondents have one-third the amount of coverage

In this study, both Monochrome respondents had similar median incomes, however the coverage for Black respondents was significantly lower.

The median income for Black survey takers was $50,162 and $54,823 for white survey takers. However, white respondents were built with a median coverage of $150,000, while Black respondents reported having only $50,000 in coverage.

Experts say a good guideline would be to have 5 to 10 times your annual income inside a life insurance coverage. According to that, both groups are underinsured. But Black Americans surveyed have just one-third the coverage of white respondents, that is substantially less than recommended. Ultimately, more research is required to draw a definitive conclusion on why that gap exists.

That said, exploring the good reputation for racial disparity in everyday life insurance might provide some clues why a disparity could exist. Starting in the late 1800s, some insurance providers provided fewer benefits in a more expensive to Black people. Once the companies encountered pushback about race-based practices, some made a decision to avoid supplying Black people altogether.

Using race as a factor when setting benefits and premiums led to the years following a Civil Rights Movement, plus some Black policyholders were awarded settlements in early 2000s after filing bigotry lawsuits. But restricting use of an economic service could have present-day consequences, leading to racial disparity across our nation. A TIAA Institute study on financial literacy discovered that the nuances of how insurance works and the way to calculate risk are topics African-Americans are less knowledgeable about, which can lead to being underinsured, overinsured, or overpaying for coverage.

Black respondents view life insurance in an effort to build generational wealth

The study discovered that 64% of white respondents believe the objective of buying life insurance coverage is to protect their own families from unpaid debt, such as a mortgage. That's compared to 37% of Black respondents who said exactly the same.

Black respondents (22%) were almost 3 times much more likely than white respondents (8%) to consider life insurance is needed for “building generational wealth.” One possible reason for this improvement in life insurance coverage perspectives may be the racial wealth gap, with white families having a median net worth of $171,000 compared to $17,600 for Black families. For Black respondents, buying life insurance coverage may be one means of closing that gap.

Additionally, owning a home is really a hallmark from the American Dream and considered one of the keys to building wealth. But research shows Black Americans are less likely to possess homes – the Urban Institute recently reported that 71.9% of white Americans own homes, 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're more prone to buy homes later in life. Since there are roadblocks around the journey to amassing wealth, some could look to life insurance in an effort to leave a amount of money for the following generation.

Both Monochrome respondents overestimate the price of life insurance

It is sensible when you do not have life insurance coverage, you might not know what it actually costs. And it turns out that, of those who have no type of insurance coverage, Black respondents believe the typical cost of insurance coverage is 30% higher ($65 monthly) than white participants do ($50 per month).

Despite the high perceived cost, 41% of Black respondents say they “intend to buy life insurance” compared to 19% of white respondents who said the same. Once they do, they'll experience the good kind of sticker shock, because as it happens, a proper 34-year-old woman can purchase a 20-year, $250,000 term life insurance policy for as little as $16 monthly.

As the survey indicates, there's actually an existence insurance gap for Black and white Americans. The amount of coverage for Black respondents lags behind those of white respondents and being underinsured leaves Black families with less of a financial cushion after a loved one passes.

How will we being an industry responsibly and effectively help Black Americans secure the right amount of financial protection? First, representation among minority groups matters, and that's why at Haven Life, we're committed to building a diverse team that serves the from the varied group of perspectives. We must use our platforms and marketing channels to grow access to educational tools and content to help end bigotry within our country. In the end do not have all the answers yet and notice that lots of work must be done to lessen the life insurance race gap, we are dedicated to being a member of the solution.