For years, and especially amongst Black folks, N’surance has been seen as a mystical, magical entity that automatically replaces losses. I’ve had elders, and even among my own peers well into their 50s, 60s and 70s, say that insurance will cover a loss. Those are the same folks who inadvertently validated shoplifting because the common belief was that the insurance company would pay to replace whatever was stolen. But as we can see from a number of Big Box stores that have since closed because of retail theft, that old wives tale is completely false.

Recently a neighbor had a garage fire that damaged a number of other garages. The heat was even more intense because it was fueled by gasoline. The heat melted/warped siding on the side of my garage as well as doing significant damage to other garages. Unlike automobile coverage that protects damage done to other cars, homeowner’s insurance only protects your own home. So when I contacted my insurance company, based on the deductible I have in place, it really wasn’t worth putting in a claim. Insurance companies hold claim payouts against the policyholder. So unless it’s a major catastrophe, it isn’t even worth making a claim.

I was talking with an insurance specialist the other day, and she was telling me that many of the big homeowner insurance companies are moving to something called a “percentage deductible.” The percentage for the deductible can be anywhere from 1 to 10 percent. Each policyholder chooses the percentage they feel most comfortable in affording. 

The percentage that one chooses is then valued against the value of your house. So if your house is worth $200,000, and you have a 1% deductible, if you file a claim, they would deduct $2,000 from the amount of the claim payout. The flip side is that if you had a small claim for $2,200, you would still have the 1% of the value of the house or $2,000 as a deductible. Depending on the need for the coverage, it can be smarter to deal with paying for the loss directly without filing a claim. 

Whether we like the idea or not, insurance companies are moving in that direction. They are in business to make money. In the news recently, large insurance companies like State Farm and Allstate are declaring that they no longer will be covering new clients in California. They attributed it to the increased losses due to natural disasters, higher construction costs, and inflation. 

Insurance companies are changing and we need to make sure everyone understands the changes and not just when there’s a claim involved.