The Impact of Life Insurance on Black Culture

• Life insurance is important for those who transition from this world and those left behind to continue their legacy.
• You could find yourself using multiple insurance policies to help your family drive into a better future. 
• Life insurance and early legacy planning will make the grieving process less stressful.

It is time to discuss Black wealth when it comes to life insurance and creating a plan for yourself and your family. Even more, it is a time to shift the narrative about life insurance from being only about death to instead shining a light on its generational benefits. Life insurance is important for those who transition from this world and those left behind to continue their legacy.

"My stake in Roc Nation should go to you / 

Leave a piece for your siblings to give to their children too / 

TIDAL, the champagne, D'USSÉ, I'd like to see/ 

A nice peace-fund ideas from people who look like we" 

- 

"Legacy"

Jay Z

Life Insurance and Legacy Planning

Legacy building and generational wealth have recently become two of the hottest financial topics to discuss. The topics are even more critical for Black people and the relation to life insurance. Why? Because, as a culture, Black Americans are often underinsured or lack any form of burial or life insurance. 

What is a life insurance rider?

A rider is an optional or extra benefit or feature added to your life insurance policy. A comparable scenario would be when you are making a purchase, and the salesperson tells you about the "extras" you can get to make that item or product much better. Of course, you have to pay for that 'extra' thing, but it makes your purchase better financially. 

Some popular riders include the return of premium insurance rider, term conversion insurance rider, and accelerated death benefit rider, also known as a terminal illness rider. Depending on your insurance carrier, the riders might change or be more enhanced.

Types of Life Insurance 

When building your legacy plan, you should consider the life insurance options listed below.

"Watch the breakdown" 

-

"Nice for What"

Drake 

Term Life Insurance

Term life insurance is often the more affordable option. However, although inexpensive, the downside of term life is that you could not receive any death benefits if you outlive the policy. For example, if you have a 20-year term life insurance policy but pass away in 30 years, your policy would have expired, and therefore, no benefits would be paid out upon your passing. 

Depending on your policy's riders and for some term policies within the life of the policy, a term life insurance may be convertible to a whole life insurance policy. The transition is known as a "term conversion. "The value of the term conversion is that no further underwriting is needed to convert the policy to a whole-life policy.

Whole Life Insurance

As the name says, this type of insurance policy is intended to last for your "whole life." Whole life insurance generates cash benefits, and they are eligible to receive dividend payments. 

Whole life insurance policies also allow for loans to be taken against the policy's cash value. You could also take out loans that can be taken for any reason and can be paid back. These types of policies can even be used as funds for generational trusts.

Universal Life Insurance

Universal life insurance is very similar to whole life insurance. The difference between the two is that universal life insurance has a flexible premium structure. Therefore, this is the best policy for you if you are looking for flexibility within your legacy planning. 

Like whole life, this policy also has a cash-value account. However, the insurance charges are pulled from the cash-value account each month. Any amount paid into the policy above insurance costs is added to the cash value. The cash value then grows at a rate determined by your carrier's performance and interest rates, with a guaranteed minimum of 2% annual growth. You could also surrender it for cash value or loans and withdrawals.

Variable Universal Life Insurance

The main difference between universal life and variable universal life insurance is that variable universal life insurance has a cash value account that does not pay a fixed or guaranteed rate of return. Instead, the cash value is invested in variable "sub-accounts" within the life insurance policy. These sub-accounts are essentially mutual funds, which represent investments in different asset classes. 

The cash value's growth (or loss) depends on the market performance of the variable accounts. Depending on how the market performance determines how your sub-account grows. Risk factor here. Variable life insurance policies allow you to take out loans or withdrawals, and the policy can be surrendered for its cash value at any time.

Navigating Multiple Insurance Policies

Depending on how you layer your Legacy Plan, you could find yourself using multiple insurance policies to help your family drive into a better future. Having numerous policies isn't just for the affluent. 

You can budget your life insurance policies like you budget your money. Give each one a job. For example, one policy can be for burial, while another for settling your or your family's estate. 

Employer-based Policies

Refrain from relying solely on the life insurance provided by your place of employment. If you leave the company, that policy leaves you. Most employer-based policies do not carry over. 

Black Culture and Life Insurance

As a culture, it is time to start taking our legacy planning more seriously. GoFundMe, fish fry dinners, and T-Shirts should be the last option our families have to resort to as a means of paying for burial or covering funeral expenses. Life insurance and early legacy planning will make the grieving process less stressful.

"Generational wealth, that's the key" 

- 

"Legacy"

Jay Z 

With the magnitude of financial stressors within the Black community, it is vital to know it is obtainable to plan you and your family's legacy with the proper knowledge and resources. An early step in the right direction is contacting a licensed insurance agent to help you construct your Legacy Plan. 

The Money Wrap Up

"My parents ain't have ----, so that ship started with me / 

My mom took her money, she bought me bonds / 

That was the sweetest thing of all time, uh" 

- 

"Legacy"

Jay-Z 

While it may be hard to think about our transition, wealth transfer is important. Therefore, audit your life now and in the future. More so, every so often, look to update your Legacy Plan to make sure that it is up-to-date.

Start how you can and expand with every gain.

The original article was previously published on Nadia C. Vanderhall's website. Edits were made for this posting.