African Americans and Life Insurance - A Rocky History

As with many things in the United States that shouldlife insurance companies that were underwriting black
not be, the selling and buying of life insurance to theAmericans back then. "This is institutional racism and
black American community has often been poisoneddiscrimination. It's a perpetuation of the ideas and
with racism--or, perceptions of racism. Even suchattitudes of slavery, and somebody needs to be
known white anti-slavery advocates as Thomaspunished for that. I'm not sure the settlement amount
Jefferson were deeply concerned that even if blacksfor the number of policyholders is sufficient," said black
got their eventual freedom and full citizenship in thecivil attorney Johnny Cochran before his death. That
United States, they would perhaps never be able tothe life insurance companies were intending racist
fully integrate with the wider society. When there arediscrimination is dubious. But, it's also entirely possible
accusations of racism that are false, or when therethat their underwriting practices then were inaccurate,
are stereotypes permitted in business or the legalyet they did not do anything to correct this.
system, this full integration is not permitted. We usuallyThe legal system has now made it a violation of
don't think of the life insurance business as some sortfederal laws for any life insurance company to use
of racial battleground. But it can be made into one. Butrace as part of the criteria for underwriting, evaluation
there are racial considerations that have historicallyof risk, or pricing of an individual's life insurance policy. In
played a role in this industry. Black Americans and lifefact, underwriters are not permitted to even know an
insurance agents of all races need to be aware ofapplicant's race anymore.
them. Black Americans' life insurance used to be soldBut, in spite of a now very intense legal defense of
door to door back in the 1920s and 1930s as "burialAfrican Americans' rights with regards to the buying of
insurance policies".life insurance, and despite a powerful targeted
The business assumption was that was all that mostmarketing effort in the 1960s and 1970s to get black
of the black Americans could afford or would evenAmericans to buy life insurance for mortgage
care about, since they were financially unsophisticated.protection, nearly 80% of adult black Americans still
Now, the life insurance industry is all about spreadingdon't have life insurance at all. Why would that be?
around risk. As these burial policies were marketed toAccording to black financial advisor with Secure
mostly low-income blacks, the underwriters wereHeights Financial, Inc. Dereck L. Smith JR, LUTCF,
aware that black Americans were, according to"There still seems to be a lack of financial planning and
records, more susceptible to violence, less likely to holdinsurance knowledge within our community as a whole.
steady jobs, given to having a lot of children, and hadUnfortunately, some [blacks'] life insurance policies are
shorter life expectancies. Life insurance companiesso similar, that you would think they were lined up in
very often called black applicants "substandard". Thisthe room to buy it. Some insurance agents try to sell
meant to them that black Americans were less likely'one size fits all' plans to [blacks] instead of educating
to keep up the premiums and more likely to force thethem and addressing their personal needs. Purchasing
company to pay out a death benefit when they werelife insurance should be based on your particular goals,
still in their younger years. So, black Americans' lifekeeping your family obligations in mind. It is all about
insurance premiums per $1000 of coverage wereeducation in the [black American] community."
much higher than their white counterparts'. Blacks wereSo, African Americans need to understand the vital
simply seen as greater risks than whites. But,importance of life insurance to their full financial
sometimes the premiums for the policies were so highprogram. The days of mere "burial insurance" and
that if the policy was kept for its full term theridiculous premiums are dead and gone. If you're a
premiums exceeded the death benefit. Although theblack American with a family and financial assets to
life insurance underwriters had some legitimateprotect but no life insurance, talk to an agent as soon
concerns, many of the companies' had pricingas possible. If you feel more comfortable talking with a
practices that came to be seen as extreme. Legalblack agent, find one and talk to them.
action in more recent times was brought against many