Often when life insurance is mentioned in the African American community, blacks shut down, turn away, or even get scared.
The dim view exists largely because many blacks don’t realize that life insurance can be used to achieve so much more financially than just taking care of a loved one’s burial expenses.
(New York Life African American agent Centario Grier and his clients. Image: Courtesy of New York Life)
Life Insurance as a Multigenerational Wealth-Building Tool
Eugene Mitchell, corporate vice president and African American market manager at New York Life Insurance Co., wants the black community to hear that message loud and clear. He swears that life insurance can help blacks create multigenerational wealth, keep assets like homes and businesses, and amplify their nest egg for retirement to name a few benefits.
Other communities have used life insurance for decades to build wealth, something Mitchell says blacks now must make a priority to help boost their net worth, protect themselves, and future generations.
Mitchell has been doing his part to make that happen. This month, New York Life and the 1,200 black agents who support this program expect to reach a milestone of selling an average of $250,000 life insurance policies to approximately 200,000 families, creating an eye-popping $50 billion of protection and tax-free future income in the black community. The financial empowerment initiative was launched in 2011.
(Eugene Mitchell. Image: © Eric Tillotson www.erictillotson.com)
$50 Billion of Protection and Tax Free-Income Pumped in Black Community
And Mitchell proclaims that degree of increased buying power can have a much broader impact on the overall black community instead of just assisting individual families. In addition to putting that money into blacks’ banks accounts and closing the wealth gap between blacks and other races, African Americans could collectively allocate the wealth to make their communities stronger economically.
“The money can be used for everything from paying for college tuition, enhancing a retirement nest egg, tithing to a church, and funding charitable giving to create sustainable wealth and economic empowerment in black America,” he says.
Recent research shows that life insurance as an inheritance has been underutilized and under leveraged by African Americans for years. Conversely, other groups have been using life insurance for years as part of their inheritance planning to transfer family wealth to the next generation.
But the African American Market agents at New York Life are hoping to change that. Mitchell says that $640 million has been paid out in death benefits to African American families since launching the program on Jan. 1, 2011. And, nine market agents last year delivered more than $1 million in policy proceeds to beneficiaries in individual families after the passing of a loved one.
Protecting Assets and Creating Inheritance Among Benefits
“We are saying that this was not a lottery ticket, but the head of a household taking on sound financial planning for their family to protect and ensure their future income, and to fulfill their intention to create an inheritance and legacy,” Mitchell says.
Now, New York Life’s African American Market agents and Mitchell’s team are on a quest to boost financial literacy in the black community. They are informing consumers that life insurance can be used to protect the future earnings of family’s breadwinner, finance the start up of a business, pay off a mortgage, and for other purposes.
“Life insurance is so much more than being about a quick fix (covering funeral costs),” Mitchell says. “It really is about helping protect your assets, creating inheritance, and passing wealth to the next generation.
Actual Ways Life Insurance Can Generate Income and Enhance Finances
Mitchell provided a glimpse how blacks can use life insurance:
A level of protection
In the unfortunate death of a parent or small business owner, life insurance can keep life moving by covering mortgage payments, college costs, and other bills. It should be looked at for its replacement value, not just for final expenses. A 2013 New York Life survey showed that Americans on average wanted enough life insurance to pay expenses for at least 14 years after the loss of a breadwinner, but in reality only had three years of protection in place. Be sure you have enough replacement income for your family or business.
In 2017, more than half of all black families in the United States have no retirement wealth at all, meaning they will likely be entirely dependent on Social Security, now paying an average monthly benefit of just $1,239. The cash value on a whole life insurance policy acts as a savings vehicle with guarantees and tax advantages. At the age of 65, a client who has had a life insurance policy for their adult life could end up with enough money in cash value which would be a good source of income in retirement. The cash value can be accessed as a loan or a reduction of the death benefit.
Consider this scenario: If grandma dies and does not have life insurance, the remaining family members perhaps have to start from scratch financially. But if grandma passes and her family receives a $250,000 death benefit, a family member can make a 20% down payment on a $1 million brownstone or rental property in an area where gentrification is increasing property values. The family member could use the money to start a business or establish college funds for kids. Both options would yield future wealth building.