The history of Black American insurance ownership

4 MIN READ | #blog

The desire to protect the people we love, especially after an unexpected event, is older than insurance itself. Long before the insurance industry was established, people informally joined together to help one another during difficult times. This was particularly true in early days of the Black community in the United States — and it’s a legacy that carries on through the centuries.

The First Black-owned insurance company

In the late 1700s, enslaved Black Americans started beneficial aid funds to support sick and dying family and neighbors and to cover funeral expenses upon their death. This financial model became the predecessor to the African Insurance Company, established in Philadelphia in 1810, and believed to be the first insurance company serving the Black community in the United States.1

Black Wall Street

In the decades following the U.S. Civil War, racial discrimination by white-owned companies made comprehensive coverage unaffordable for many Black Americans, and people often opted for minimal policies that only covered funeral expenses. 2 In response, Black entrepreneurs fought back and served their communities by establishing mutual insurance companies. In a mutual insurance company, the policyholders are also the owners of the company, allowing them to share in the company’s profits via dividends.

In 1898, three local leaders in North Carolina — Aaron McDuffie Moore, John Merrick, and C.C. Spaulding — launched the North Carolina Mutual Life Insurance Company. Beyond offering ample life insurance policies, the company was an economic engine for the area that became known as the “Black Wall Street.” The company, later called NC Mutual, served as an inspiration for Black-owned insurance companies across the country.3

A lasting legacy

The legacy of Black insurance companies like NC Mutual continues to guide policyholders today, but unfortunately, some outdated thinking about insurance remains. A 2021 study by the Life Insurance Marketing and Research Association (LIMRA) found that 30 percent of Black Americans think of life insurance as only for funeral expenses, and 66 percent say they own life insurance primarily for this reason. Survey respondents across all demographics also showed misunderstanding about the cost of life insurance, including 75 percent of Black Americans who overestimated the expense.

But life insurance is for more than just funeral expenses. Life insurance can serve as a steppingstone for building wealth and protecting your legacy, ensuring that your hard work carries over to the next generation. In addition, some forms of life insurance, like whole life insurance, can accrue cash value over time, helping you accumulate capital for things like starting a business or buying a home.4 5 6

Black American insurance coverage today

Today, Black Americans are increasingly buying life insurance, in part due to the Covid-19 pandemic. The LIMRA study showed that the majority of Black Americans (56 percent) own life insurance today, yet 46 percent, or approximately 20 million Black Americans, say they believe they need some or additional coverage. This means there is still work to do to close the gap between those who have life insurance and those who want it.7 The good news is that LIMRA’s research also found that 60 percent of Black Americans intend to purchase life insurance within the next year, whereas only 36 percent of the general public has the same intention.

Fortunately, new technology is making the process of obtaining insurance easier than ever. Digital applications and approvals are quickly becoming the norm, speeding up the process and making life insurance more readily available to all who want it. Now is a good time to talk to a financial professional and learn more about the options that make sense for you and your loved ones. 

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1 Honoring African Americans: Cornerstones of Economic Development – African American Insurance Companies, Library of Congress, Feb. 25, 2021

2 Honoring African Americans: Cornerstones of Economic Development – African American Insurance Companies, Library of Congress, Feb. 25, 2021

3 The Story of John H. Merrick and the Largest Black Life Insurance Company in the U.S., Scalawag Magazine, July 22, 2019

4 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

5 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

6 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

7 New Study Finds Black American Life Insurance Ownership Increased During Pandemic, LIMRA, July 6, 2021