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Is there a life insurance race gap?

Jan 5, 2021 6 Minute Read

Over the last year, Black communities across America have been hit especially hard by the health and financial effects of the pandemic. At the same time, protests are growing over violence to the Black community. These issues are shining a spotlight on racial justice in America, and financial security is a big part of that conversation.

There are well-documented differences in wealth by race for Americans, from how much we earn to how much money we pass along to our kids. The net worth of the average White family is about 10 times greater than the net worth of a Black family. Black people report higher levels of unmanageable debt. And during young adulthood, when many people are laying the foundation for financial success, Black adults are more likely to report that they don’t have enough savings.

So do these same trends apply to life insurance? A life insurance plan is one of the most affordable ways to provide a financial cushion for your family if you die unexpectedly. Regardless of your financial situation, you most likely need life insurance if people are depending on you for support – and the demand for life insurance is even greater for families that may not have as many other financial resources. Yet research shows that Black families don’t have the same coverage levels as other racial groups, in many cases.

Death doesn’t discriminate, and every family needs the assurance that the life they’ve built is protected. Here’s a closer look at how race factors into life insurance coverage, and why it’s important for everyone to be covered.

Are there racial disparities in life insurance?

According to industry group LIMRA, 53% of Black adults in the U.S. own some form of life insurance, nearly the same as White and Hispanic adults (54% each). But here’s the issue: Far fewer Black individuals say they have enough coverage.

Almost half (46%) of Black adults say they need more life insurance, compared with just 38% of Hispanics and 29% of Whites. So while ownership rates may be similar, the amount of coverage is also important for protecting families.

In general, Black adults are more worried about their finances than other racial groups. LIMRA found that Black people reported higher levels of concern in areas like:

  • Leaving an inheritance for the next generation
  • Being able to save money for an emergency fund
  • Paying monthly bills
  • Burdening their families financially if they died prematurely
  • Paying for burial and funeral expenses

These are the types of needs that life insurance is designed to cover. Life insurance offers a financial cushion much larger than most people can save on their own, especially for Black families with less generational wealth.

With life insurance, you pay a premium each month, and your family can access a cash payout of hundreds of thousands – or even millions – of dollars if you die while the policy is active. The money from a life insurance policy death benefit payout also comes with no strings attached. That means your family can use it to cover monthly housing payments, pay for bills or groceries, save for college or emergencies, or ease the burden of funeral costs.

That’s why it’s crucial to buy enough coverage to pay for the financial responsibilities that may come up over the years. A good rule of thumb is to have seven to 10 times your income in life insurance coverage, but every family’s needs are different.

Why are there differences in life insurance coverage by race?

Understanding why racial disparities in life insurance exist is a first step toward solving them. In 2020, the insurance industry issued a statement acknowledging these differences and pledging to find solutions.

Today, it’s illegal to discriminate based on race when evaluating a life insurance application. The Civil Rights Act of 1964 put an end to discriminatory practices in the insurance industry like race-based life insurance premiums, which charged Black customers higher rates and only gave them two-thirds of the value of their policies compared with White customers.

Different views on the purpose of life insurance may also help explain the gap in coverage by race. A 2018 LIMRA study found that:

Understanding all the ways that life insurance can support a family can help shoppers make sure they’re buying enough, regardless of their race.

Closing the gap

How can we put an end to disparities in life insurance, like the race gap and the gender gap? It requires putting life insurance options within reach for people of all backgrounds, and helping them make the right decisions for their families.

If you’re looking to protect your own family, here’s what to keep in mind.

  • Life insurance is more affordable than you might think. People of every gender, age, and race tend to overestimate the cost of life insurance, which opens them to the risks of being uninsured. Knowing the actual cost of a policy can help make sure you’re buying enough to cover all your family’s needs. At eFinancial, the cost of a $250,000, 10-year term life insurance plan for a 30-year-old woman starts at about $15 per month.
  • The process can be quick and simple. Black adults report being less knowledgeable about financial topics like how insurance works than other racial groups, which can lead to issues like paying too much or not buying enough coverage. Our agents at eFinancial can make the process easier by providing advice, helping you compare options from multiple companies, and finding a policy that fits your budget. Once you choose a plan, you can buy life insurance quickly over the phone and get covered the same day, in many cases.

Still have questions or want more information about life insurance?

We’re here to help. Call us or start your quote online today.


At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.