The Black Community and Life Insurance

February is Black History Month. This is the month that we celebrate the history of African Americans beginning before the Mayflower sailed with the Pilgrims, and continuing to the present. One can't tell the story of America without preserving and reflecting on the places where African Americans have made history.

In 1919, an African American named Frank Gillespie became the owner of the first black owned Life Insurance Company, Supreme Liberty Life Insurance Company located in Chicago. Prior to starting his own insurance company, Gillespie worked for a white owned insurance company that often denied coverage to black people and the ones they did insure were offered inferior quality life insurance policies.

Insurance underwriters saw blacks as higher risk policy holders who were more prone to violence, less likely to hold steady jobs, more likely to have lots of children and a shorter life span. Sometimes blacks were charged a much higher premium than whites.

It was said in the past that African Americans had a much more positive view of life insurance than whites did. African Americans used to embrace and own life insurance more than other races and ethnicities....14% more than whites and 22% more than hispanics. Traditionally, black families purchased policies known as "burial insurance" that were sold door to door by white insurance men. Black families were allowed to purchase policies to cover the cost of burials ONLY, while white families could could pay lower premiums and receive more life insurance coverage and leave their families an inheritance.

For all the benefits African Americans have gained owning life insurance, their historical relationship with the life insurance industry has been a complicated one. Despite troubled history, life insurance policies have for many years served as the cornerstone of many black families' households financial plans. There was culteral pride in having a decent burial. It wasn't about showing off. It was about dignity. These cultural ideas haven't changed. The fabric of the black family has changed.

Some black families are unable to make long term financial plans. The pressure to balance life insurance premiums with other day to day needs is not only stressful, but a low priority on many household budgets. However, most African Americans remain loyal to life insurance. Today federal law prohibits any insurance company from using race as a criteria for evaluating risk or setting a premium for an individual policy. Underwriters are not permitted to know the race of the applicant for life insurance.

Life insurance should be a very important part of the African American community. In the past, the emphasis was on burial. Today, the focus should be on wealth building and creating an estate for our families.