Why African-Americans are so loyal to life insurance

It funds burials and creates an inheritance. But their historical relationship with the industry has been a complicated one

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When Bonnie Caver and her husband Jon married in 1967, one of the first things they did was buy life insurance policies, mainly because it was something they were taught from early on by their families to always have.

They had no idea how important their decision would be. Fifteen years later, Jon became seriously ill and then died of leukemia at age 46.

"My husband bought an insurance policy and created an estate before he had any idea he was sick," said Ms. Caver, 67, of East Liberty. "Because of that decision, I never had to work again."

The number of people in this country who own individual life insurance policies is at the lowest point in 50 years. But African-Americans continue to embrace life insurance more than people of other races and ethnicities.

A study recently released by two leading insurance industry associations, Limra, and the nonprofit Life Foundation, found African-Americans more likely to own life insurance (76 percent) than whites (62 percent) and Hispanics (54 percent).

"Our data shows in spite of the wealth gap -- and maybe because of it -- African-Americans have a much more positive view of life insurance than whites do," said Robert Kerzner, president and CEO of Limra, based in Windsor, Conn.

Researchers found the main reasons African-Americans remained so loyal to life insurance stem from a deep desire to avoid burdening others with burial expenses, as well as the fact that often life insurance is the only means of leaving an inheritance to their loved ones.

For all the benefits African-Americans have gained from owning life insurance, their historical relationship with the life insurance industry has been a complicated one.

In the early part of the 20th century, black families bought policies known as "burial insurance," which was sold door-to-door by primarily white insurance men. The black families were allowed to purchase policies to cover only the costs of burial, while white families could pay lower premiums and receive more life insurance coverage, according to lawsuits.

Insurance underwriters saw blacks as higher risk policyholders -- more prone to violence, less likely to hold steady jobs, more likely to have lots of children and a shorter life span. Sometimes the premiums charged were so high, they exceeded the death benefit if the policy were kept to its full term.

Several life insurance companies, including MetLife, Prudential, Liberty Life and about 20 others, were forced to settle race-based claims totaling millions of dollars for policies they to sold black families during this era.

Today, federal law prohibits any insurance company from using race as a criteria for evaluating risk or setting a price for an individual policy. Underwriters are not even permitted to know the race of an applicant for life insurance.

Despite that troubled history, such policies have for many years served as the cornerstone of many black families' household financial plans.

Like many of her peers who grew up in East Li berty in the mid-1960s, Urban League of Greater Pittsburgh president Esther Bush vividly remembers her working class parents emphasizing the importance of life insurance.

"My mom watched out for old people and ill family members," Ms. Bush said. "It wasn't about whether they had money in the bank. The concern was: Do they have life insurance? With a policy, their kids could have something, and the person could have a decent burial.

"There was so much cultural pride in having a decent burial and in the quality of the funeral itself. It had to be a church funeral with a decent casket and good 'going home' music.

"It wasn't about showing off. It was about dignity."

Those cultural ideas have not changed but as the fabric of the black family and the black community has changed over the decades, more families are unable to make long-term financial plans.

At a time when gun violence takes the lives of too many young African-Americans, many of their families are in no position to buy life insurance. That can force them into the unfortunate position of soliciting money from the community for a funeral service.

"You have many more parents and grandparents in our community who are either teenagers or very young adults," said Tim Stevens, of the Black Political Empowerment Project, based in the Hill District.

Last week, officers of that organization mounted a vigorous rally to raise money for the funeral expenses of 3-year-old Zy' Miere Sewell, a child killed by a gunshot wound of the head in a Homewood apartment. Police are investigating the death.

Will Anderson, a Homewood business owner who serves on the Black Political Empowerment Project's planning committee, said he contacted media organizations and appealed to several local elected officials and community leaders to raise the necessary $2,500.

A spokesman for Spriggs-Watson Funeral Home in Homewood confirmed that a generous private donor had stepped in to pay a significant portion of the child's funeral and burial costs. The service was scheduled to be held Saturday at New Testament Missionary Baptist Church in Wilkinsburg.

"They really have rallied around," the funeral home spokesman said.

According to the most recent results of a study conducted every six years by Limra, a global firm that provides research to insurance and financial services companies, ownership of individual life insurance polices in this country has hit a 50-year low. For families under financial stress and surviving paycheck to paycheck, it is a low priority on many household budgets.

African-Americans in general fared worse than other racial and ethnic groups during the recession, which means many black families are under even more pressure to balance life insurance premiums with other immediate day-to-day needs. Yet, many still seem to make it a priority.

"Life insurance is a very important part of the African-American community," said Grace Robinson, a African-American life insurance agent in Pittsburgh for 29 years.

"In the past, the emphasis was on burial. But now the focus should also be on wealth building and creating an estate for our children as we pass."

Correction/Clarification: (Published August 16, 2011) Bonnie and Jon Caver married in 1967, and Jon died 15 years later. A caption on a photo accompanying a Sunday story about life insurance had incorrect dates.

Tim Grant: tgrant@post-gazette.com or 412-263-1591.


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