- Traditionally, life insurance policies were marketed to the black community for funeral expenses, not as an investment tool, and blacks received higher premiums for lower death benefits.
- According to financial advisor Rosalyn Glenn, life insurance can be a powerful tool for building your wealth, even during a lifetime.
- Permanent life insurance can be a particularly good option because it never expires and there is a cash value that you can borrow against.
- Education about how life insurance products build wealth is key to closing the racial wealth gap.
- Watch Business Insider close the panel on the racial wealth divide.
The coronavirus pandemic has the inequalities and health inequalities fueling a lack of trust between the medical profession and the black community. Stories from Anarcha, the Tuskegee experiment, Mississippi “appendectomies, “and Henrietta misses are memories of how the medical community has abused black patients. Even today, 40% of freshman and sophomore medical students subscribed to the belief that black people’s skin is thicker than whites, according to the report. Association of American Medical Colleges.
Like the black community’s distrust in the medical world, there is a distrust in the financial sector. The FBI, led by J. Edgar Hoover, said the goal was to prevent the emergence of one Black Messiah that would unite the black community. And if there has been prosperity in it Black business centers Like it Black Wall Street and historical Beale Street, they were destroyed by racist attacks and replaced by white companies.
The economic impact of COVID-19 combined with pay inequality and institutional racism continues to create barriers generate wealth in the black community. But despite the setbacks of 2020 and the past, in the words of poet Maya Angelou, “we are still rising.”
Closing the gap between races and wealth will take time and effort on many fronts, but according to Rosalyn Glenn, a financial advisor at PrudentialIt’s an important step in making sure you have adequate life insurance – and understanding how it can help you build wealth not only after your death, but also during your lifetime.
“Life insurance is for the living, not the deceased,” said Glenn, who has spent the past 30 years dedicated to education and helping build wealth within the black community. “You want to make sure your family is taken care of, but we need to start thinking about life insurance as more than just something to bury me with.”
Glenn noted that there are three main features of life insurance:
- Death benefits to leave a legacy.
- Generate income for retirement over time from the accumulated cash value.
- Deferred taxes.
Glenn is passionate about educating the black community and explains that regardless of your income, you can use life insurance to boost your financial plans – not just after you die, but during your lifetime.
Glenn said African American Baby Boomers believed strongly in life insurance. ‘I remember my grandparents paying the insurance man every week. But I also remember when it came time for us to take advantage of that insurance policy, it wasn’t there because we didn’t understand how it worked. ‘
For years, life insurance was marketed to the black community as an afterlife, not an investment tool. Think Lorraine Hansberry’s “A Raisin in the Sun”. After the death of the father, the family can finally move to a better neighborhood thanks to the insurance.
“For decades it was standard practice with some insurance companies to charge blacks more for products and offer them small funeral insurance that provided little value for the premium paid,” said Forbes. Studies show that even if they have life insurance, most African Americans are underinsured. Many have what is known as definitive expense insurance which essentially covers the funeral and burial costs.
However, the benefits of life insurance as an investment tool become apparent when we consider the career of rapper and entrepreneur, Master P. He started his rap label from $ 10,000 left by his grandfather. life insurance policy and now has a $ 250 million business. Imagine how much more could have been achieved with more!
Start with a budget
Glenn said, “Financial wellness is being thoughtful about your income, expenses, and household knowledge. Everyone needs a budget and must spend their income to support themselves. COVID-19 taught us what we can do without before we go. thought we needed it. ”She noted that for some dual earners, losing one income can put families below the poverty line. She recommends these steps to achieve financial well-being:
- Determine what you need versus what you want.
- Live within your means and develop a debt reduction plan if you are overextended.
- Start young if you are in good health and insurance premiums are cheaper.
- If you didn’t start young, start now. You may not be able to catch up completely, but you can certainly mitigate the damage that could potentially be done by not making that change now.
Get a combination of permanent and term life insurance
There are two types of life insurance: permanent life and term life. Permanent life insurance never expires and is more expensive because, in addition to a death benefit, it has a cash value component that you can borrow during your lifetime. You pay more in the early years of the policy – which makes having a budget all the more important – and that earns interest that creates cash value. However, premiums decrease as you get older.
only covers a specific period of time – usually five, 10, 20 or 30 years. If you die during that period, your beneficiaries will receive your death benefit. If you live past the term, you will need to reapply for insurance, which will get more expensive as you get older.
Glenn said just having a life insurance policy isn’t a good idea, especially for the black community. She recommends a combination of permanent and term life insurance, as permanent life insurance is a tool for building wealth and leaving a legacy in the black community. She noted that traditionally because of lower-paid jobs, African Americans have no other ways to build wealth, but permanent life insurance is a starting point.
She said, “If you can’t afford permanent life insurance, get a life insurance policy with the goal of converting it before the policy ends.” The goal is “to get us to live beyond today and think about how the decisions we make now determine how we will live later in life.”
Glenn recommends that you “ make sacrifices along the way so you aren’t forced to bring them to the end of life. ” That’s where having a permanent life insurance policy helps provide income for a lifetime – to pay for college, a second home, or finance a business.
Many people think their employer has taken care of it group life insurance is enough. Glenn notes, however, that this “doesn’t follow you when you retire and even if you can make it an individual plan, the cost would quadruple.”
Convert your term life insurance to a permanent policy to prepare for retirement
Glenn notes that life insurance is the optimal way to prepare for retirement. She explained that you can “use life insurance to generate income for yourself when you retire because permanent life insurance builds cash value so that you can pay monthly income at 65.”
She warned that she has met many 55- and 60-year-olds who had life insurance but did not convert it. Now they are older with health problems and cannot afford to pay premiums to insure themselves.
Some term life insurance policies cannot be converted. For those who can convert, there is usually a time window that you can convert. However, it is possible that competing life insurance companies may offer this convert your life insurance policy. You do not need to submit to additional medical insurance as your policy would be converted to the health assessment under the original policy terms. Your health insurance has been blocked from the time your term life insurance came into effect.
Keep in mind that there are several types when you make the conversion from a lifelike to a lasting life permanent life insurance policies, such as a whole, universal and variable life. It’s important to talk to your insurance agent or financial planner about the differences between the different permanent life insurance policies to understand what works best for your situation.
Glenn said, “Regardless of your income level or socioeconomic status, you need a financial advisor or planner at some point in your life because you’re building savings in an income stream.” She said the benefit of working with a planner is that you ‘think strategically about what you’re trying to achieve and plan for possible market downturns to help you ride through the storms’.
Contributor of Business Insider Malcolm Etheridge previously wrote, “According to the Certified Financial Planner Board, in 2019, about 1.5% of certified financial planners (CFPs) in the United States were black. To put it plainly, there are only 1,355 black CFPs out of a total of about 87,000 practitioners. These numbers are not only bleak, they are not improving fast enough. “
Glenn understands that there is a lack of trust between the black community and financial professionals. She recommends building a relationship with someone in the financial industry. She noted that while there is no association or website for black financial planners and advisers, readers do Broker verification to find financial planners of color – and the CFP Board site is another great resource.
Ronda Lee is an insurance associate editor at Personal Finance Insider and covers life, auto, homeowner and renter insurance for consumers. She is also a licensed attorney who has practiced litigation and insurance law.