Homeowners Insurance in Colorado

Colorado is one of the most beautiful states in the country. It is located in the middle of the United States, which makes it prone to earthquakes, wildfires, and severe winter storms. That is why Colorado homeowners desperately need homeowners insurance. That coverage repairs or rebuilds their home after a qualifying event. Colorado makes the list of states that are most at risk of devastation from wildfires. Since 1953, Colorado has seen 80 federally declared natural disasters, and the disaster rate per million people in Colorado is 13.53.

Colorado has pretty intense winters, with cold temperatures, meaning frozen pipes, heavy snow, and ice dams are also issues that residents must deal with. Fires, lightning, theft, and vandalism can also damage a home in Colorado. Due to many wildfires, frequent floods are now an issue for Colorado homeowners.

No U.S. state requires homeowners insurance, but they strongly recommend it to anyone who owns a home. However, if you take out a mortgage to buy the property in Colorado, your lender will require you to purchase and keep homeowners insurance on it for the entire life of the loan.

The national average for homeowners insurance is $2,728 or $227 per month. In Colorado, homeowners pay $4.054, which is much higher than the national average.

Depending on where you live and the typical perils, you will have certain coverages available to you. The protections available in the state of Colorado include:

Due to the increase in floods, you can also purchase flood insurance from some carriers in Colorado.

Climate change is the main driver of increasing insurance rates. Colorado leads the pack in rate spikes, which have contributed to a 34% increase across the country over the past five years. More storms and wildfires mean an uptick in claims, which in turn means increased rates.

Colorado saw one of the highest rate hikes, 43.7%, from 2018 to 2023. Wildfires are incredibly damaging to property, and with more frequent wildfires in Colorado, the rates in that state keep climbing. After filing even one claim, a homeowner's insurance can increase by $168.

Earthquakes, wildfires, floods, and harsh winter storms are the major causes of insurance claims in Colorado. Fire causes the most damage; an average claim costs insurers $77,340. Floods or other water damage cost insurance providers $11,650 per claim. Wind and hail claims average $11,695 in the state of Colorado. From 2015 to 2019, Colorado insurance providers lost $1,936,387,200 in claims. Seventeen percent of Colorado homes are at risk for wildfires.

Floods are also becoming a major concern for homeowners and mortgage lenders. Experts highly recommend that Colorado residents purchase special flood insurance to protect against this ever-increasing peril.

Only certain carriers offer flood insurance. FEMA (Federal Emergency Management Agency) manages the National Flood Insurance Program (NFIP) through a network of 50 providers across the U.S.

Flood insurance can repair damage and replace items after a flood. It can cover the building and/or your personal belongings, depending on your options. This program is available to homeowners, renters, and businesses. Learn more about the program on FEMA's website.

The size, location, and condition of your home are just some of the factors that impact your home insurance costs. Other things that can increase or decrease your rates are whether you own the house outright or finance it, your level of coverage, your deductible, your claims, the cost of materials in your area, additional risks on the property, and your credit score.

Living in a state with a high risk of wildfires and floods gives you an opportunity to find ways to save on your home insurance. Some tips include:

Home insurance rebuilds or repairs your home after a qualifying event. It can be invaluable after a fire, windstorm, flood, lightning strike, vandalism, or other peril. Your typical policy will also include exterior items like a swing set, barn, barbecue grill, fireplace, or swimming pool if they get destroyed or damaged.

You can obtain home insurance in several ways. You can call the company's 800 number and ask for a quote, search online, or visit your local insurance agent. Shop around and compare rates between carriers and see what they provide. Once you land on a provider and select your coverages, you must pay the first year in full. After that, you can pay monthly or once a year. Your policy will renew each year and remain in effect as long as you keep making payments and don't have too many claims.

Some of the most common home insurance discounts offered by different firms are:

• Early Quote Discount: If you get a quote well in advance of when you need it, the provider may offer you a discount.
• Remain Claims-Free: Measure your claims against the impact they could have on your rates. Take care of small stuff yourself.
• Safety/Security Discounts: Install security/safety systems, smoke alarms, and fire extinguishers for extra discounts.
• Military & Employee Discounts: Teachers, government employees, military personnel, and others may be eligible for deep discounts.

Common Rates Offer by Homeowners Insurance Firms

New homes earn discounts because they use more modern, safer materials and are less risky. Many carriers offer significant discounts when ensuring brand-new homes. Of course, your homeowner profile (credit score, age, and claims history) will also factor in, as will the firm you choose.

The average rate for homeowners insurance on a new construction home is about $80/month, depending on the carrier.

The top10 insurance firms in Colorado and new home savings:

Upgrading or renovating your home refreshes it, makes it stronger and more resilient, and adds value. However, renovations also impact your home insurance.

Home Renovations that Increase Rates

Some home renovations that will increase your insurance rates include:

• Building an Addition: Adding space to your home means adding value, and the more value, the more money it will cost to replace, and your rates will go up.
• High-Quality Upgrades: If you replace flooring, appliances, and fixtures with high-end, expensive ones, you will pay more insurance because they are more costly to replace in the event of a disaster.
• Adding a Fireplace: You can't beat the coziness of a fire on a cold winter's night. But adding a fireplace adds risk and your premiums will go up considerably. Fire is one of the most damaging perils.

Home Renovations that Decrease Rates

Some home renovations that will decrease your insurance rates include:

• Installing a Sump Pump: Sump pumps can keep your basement from flooding. Even better, add a battery backup in case of a power outage. Your insurer will give you a discount for taking these preventative steps.
• Replacing Siding or Roof: Replacing your roof or siding with fire-retardant and wind-resistant materials could save you a lot on home insurance. Installing shatter-proof windows is also a good idea.
• Smart Technology: Installing devices to improve home efficiency, such as gas leak sensors, water shut-off devices, and smart locks, could lower your annual insurance premiums.

Regular wear-and-tear repairs like replacing your water heater, furnace, roof, or siding or dealing with mold or pests are not items covered under your insurance policy. Your home insurance only pays for repairs and replacement of damage caused by a qualifying event.

Because renovations can raise or lower your insurance rates, speaking with your agent before beginning any work is best. Find out what the impact will be before you make those upgrades. Have your agent walk through after to update your policy with enough coverage to restore it to its new level of quality.

Renters also need insurance to protect them in the face of disaster. Although renters insurance does not include dwelling coverage, it does cover personal belongings, liability protection, and additional living expenses. Renters insurance comes in two types: actual cash value and replacement value. Actual cash value considers depreciation and will only reimburse you what the item was worth at the time of the disaster. Replacement value will give you enough money to replace it regardless of depreciation or age.

Three basic things factor into the price of renters insurance:

Depending on where you live, the average rate for renters insurance in Colorado is $10-$14 a month, which is relatively inexpensive compared to other states.

Homeowners and condo insurance are similar but with one very big difference. The dwelling coverage in homeowners pays to replace or repair your home after an event. With condo insurance, the insurer will only pay to repair or replace the interior of your home. This is called "walls-in" coverage. The condo association's master policy covers the building and all exterior features. However, it will only restore your condo back to its original condition. Many owners upgrade flooring, appliances, fixtures, and other items, and they need condo insurance (HO-6 coverage) to bring the interior back to its present condition.

Renters insurance doesn't cover dwellings (that is covered under the owner's policy), and although condo insurance does, it's limited to only "walls"-in". Plus, your liability insurance will only cover someone who is injured within your condo, not outside.

Condo insurance covers the following items:

• Interior Walls
• Wiring and Plumbing
• Appliances
• Furniture
• Carpets & Other Flooring
• Light Fixtures
• Countertops
• All Other Personal Possessions

The different types of condo coverage available are:

• Personal Property: This coverage replaces your items after an event or theft.
• Personal Injury: This covers your legal bills if someone is injured in your condo and sues you.
• Loss of Use: If you must vacate your condo while it is rebuilt, this coverage will pay for your food, lodging, etc.
• Loss Assessment: Covers you if you damage the condo or any common areas.

Condo insurance can cost as little as $40 a month. In Colorado, condo owners pay an average of $760/year or $63/month. That is with a $1,000 deductible, $60,000 in personal property coverage, and $300,000 in personal liability coverage.

You can save on your condo insurance by installing a security system, bundling your coverages, increasing your deductible, improving your credit, and only filing claims when necessary.

The Colorado home insurance market is failing. It has been unprofitable for the past eight out of eleven years, more than any other state. Unfortunately, seen as a high-risk state, insurers are pulling out of the area and leaving only a few carriers to insure all residents, making competition fierce. Those that stay in the market will continue to raise prices to cover claims and losses.

The biggest reason for this is wildfires and floods. Although Colorado sees heavy winter storms and damage from wind, ice, and snow, the heavy hitters causing most of the claims and losses are fires.

No federal agency regulates insurance carriers. Instead, they are overseen and managed by state agencies. In Colorado, that agency is the Division of Insurance, located at 1560 Broadway, Suite 850, Denver, CO 80202. This agency ensures insurers behave ethically and professionally, investigates customer complaints, and sanctions guilty firms.