This may come as no surprise to homeowners, but the cost of Colorado’s homeowners insurance is the eighth highest in the nation, according to Bankrate, a financial services company that tracks all sorts of monthly bills.
At an average of $266 per month or nearly $3,200 a year, premiums are higher here than in states such as California ($121) and New York (144), as well as neighbors Arizona ($172), Utah ($104), New Mexico ($169) and Wyoming ($131).
Blame extreme weather, hail damage and wildfires for our lofty rank, said Shannon Martin, Bankrate’s insurance analyst and a licensed insurance agent. But diving a little deeper, Martin also cited how policies are structured by states, the rising cost of homes, and something called “social inflation,” a term used by the insurance industry to describe the impact beyond regular economic inflation.
“That’s the increase in lawsuits and the amount of payouts from the lawsuits,” Martin said. “Public opinion has changed on who’s really liable for these actions and how much money you should get in a lawsuit. … It’s impacting how policies are rated and how much they cost.”
A 2023 analysis by the Colorado Division of Insurance found payouts have increased in recent years causing insurers in Colorado to lose money on the premiums collected. And premiums for the average homeowner increased 51.7% between January 2019 and October 2022. The report also touched on wildfire risks near densely populated areas of Fort Collins, Denver and Colorado Springs where “insurance carriers would be reassessing their appetite for wildfire risk (and) could have an impact on a material group of Colorado homeowners.”
This image provided by JJ Unger, shows hail damage to the window of vehicle, Monday night, May 20, 2024, in Yuma, Colo. Residents in the small city in northeastern Colorado were cleaning up Tuesday after hail the size of baseballs and golf balls pounded the community, with heavy construction equipment and snow shovels being used to clear hail that had piled up knee-deep the night before. (JJ Unger via AP)
Colorado is ranked second in the nation for hail-damage claims and has a “highly litigious climate,” said Carole Walker, executive director of the Rocky Mountain Insurance Association, a trade group that represents insurers. And nearly half of the state’s population lives in wildland-urban areas that include another one million people living in areas with “moderate to very high risk of wildfire,” according to the Colorado State Forest Service. Combined with a growing population and pricier homes that cost more to rebuild, there are a number of reasons for higher prices.
“We truly are at a tipping point in Colorado,” Walker said. “(Colorado) ranks second after California for risk of wildfire. … I think fears of what we’ve seen happen in California in recent years of an exodus of insurers, a lot of the reasons that insurers were reducing the number or policies or leaving California was because of man-made catastrophes.”
According to the state’s insurance division, the agency has asked homeowners and insurers about renewals and nonrenewals. The results are expected next year, a spokesperson said.
Walker, who sits on many local government boards, doesn’t recall any insurers exiting Colorado yet but are reducing the number of policies on risky properties they no longer can afford to cover. She’s trying to make sure government restrictions and outdated regulations better balance insurer risk with availability of insurance for all Colorado households.
“If we stabilize the market, that’s what we’ve all been working toward,” she said. “Put in more hail-resistant roofs. If we scale up our mitigation for wildfire and make it measurable, those are all things we can do to reduce the risk of hail and wildfire. That’s going to have a long-term impact on keeping insurers here (and) keeping those homes insurable.”
According to RMIA, the average increase in homeowners’ premiums in Colorado grew 57.9% from 2018 to 2023.
Lawmakers passed legislation last year after there were concerns about households losing their insurance due to cancellations and non-renewals. The Fair Access to Insurance Requirements, or FAIR plan, is an “insurer of last resort” and designed to provide property coverage to homeowners and businesses in the highest-risk areas who are unable to get coverage.
FAIR coverage is funded by insurance assessments based on an insurer’s market share. The policies should be available to homeowners and businesses in early 2025. But it’s just one “tool in the toolbox,” said Walker, who is on the state’s FAIR board.
“At the same time, I do think that people have to understand that insurance has been underpriced for homeowners when people haven’t had to use it,” she said. “Now that we’re using insurance more, it’s got to be balanced with what it costs to pay out claims.”
As for the cost by state, Bankrate’s Martin pointed out that states like Florida, ranked second-most expensive, must include wind coverage from storm damage while nearby states like Louisiana, also hurricane prone, do not. In California, ranked in the bottom half of insurance costs, fire coverage is excluded so buyers must pay extra for it.
“In Colorado, fire is still included, which is actually a really good thing because the cost of having two policies is just so much more than having everything packaged in one policy,” Martin said. “People in California now need home, fire, flood and earthquake insurance policies. It’s very expensive.”
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