Colorado homeowners are facing a financial crisis as rising insurance premiums threaten their financial stability. The situation is particularly dire for those on fixed incomes, who are struggling to keep up with the increasing costs. Gerard Brennan, who bought a home in the Security-Widefield area in 2017, expressed his concerns, stating, “We’re one paycheck away from disaster.” The Brennans initially believed that Widefield would be an affordable area for them to settle down and make it their “forever home.” However, the rising insurance premiums and property taxes have forced them to consider selling their home and moving somewhere more affordable.
The Brennans’ annual insurance premium has skyrocketed from $1,400 six years ago to $3,900 today. This significant increase, coupled with rising property taxes, has made their mortgage payments nearly unaffordable. Mr. Brennan, who suffers from multiple sclerosis, relies on disability insurance as his only source of income, along with his spouse’s caregiver pay. The couple is now faced with the difficult decision of whether to stay in Colorado Springs or move further out to Peyton. However, leaving their current location would mean leaving behind their doctors and support network.
The high home insurance rates in Colorado can be attributed to three main factors, according to Carole Walker, executive director of the Rocky Mountain Insurance Information Association (RMIIA). Firstly, the state is prone to catastrophic climate events such as hail storms and wildfires. Colorado ranks second in the country for hail claims and third for areas with the highest wildfire risk. These natural disasters have caused billions of dollars in losses over the years. Walker emphasized that “Mother Nature is not slowing down,” and the frequency and severity of these events are only increasing.
Secondly, the cost of goods and services has risen significantly, including the price of construction materials like lumber, drywall, and glass. This has led to higher costs for repairs and rebuilding after disasters, further driving up insurance rates. Additionally, the reinsurance market, which provides insurance for insurers, has seen a record increase of 40% in rates. Colorado is currently the third most expensive and least profitable state for insurance companies, after Louisiana and Texas. Walker explained that insurance companies are trying to balance the amount of risk they take on with their ability to afford reinsurance.
While some insurance companies have pulled out or reduced their availability in states like Florida, Louisiana, and California due to similar factors, Walker believes that insurance companies do not want to leave Colorado due to its growing population. However, she warned that the state is at a tipping point, and if lawmakers attempt to regulate the industry in a way that pushes insurers out, it could have severe consequences for homeowners.
To address the issue of homeowners struggling to secure coverage, Governor Jared Polis signed into law the Fair Access to Insurance Requirements (FAIR) Plan in 2023. The FAIR Plan is a last-resort insurance option for homeowners who cannot obtain coverage from any other entity. However, Carole Walker cautioned against relying too heavily on this plan, as it could lead to the private market being pushed out, as seen in Florida.
The Colorado Division of Insurance, along with the state legislature and Insurance Commissioner Michael Conway, is committed to finding a resolution to ease the financial burden on homeowners. Possible solutions will be explored through legislative measures. In the meantime, homeowners can try to secure lower premiums by budgeting more for insurance and shopping around for better rates. Mitigation efforts, such as home hardening against wildfire dangers, can also help reduce insurance premiums statewide. Walker advised homeowners to consult with local fire officials and insurance companies to explore mitigation options.
While homeowners cannot control climate catastrophes, taking proactive steps and investing in mitigation measures can make homes more insurable and insurance more affordable in the long run. It is crucial for homeowners to stay informed, be proactive, and explore all available options to protect their financial stability in the face of rising insurance premiums.