Larimer Square after the Covid Shutdown was lifted (Photo: Adobe Stock)
Colorado is at the forefront of a growing home insurance crisis, and what it does next could help lead the way for the rest of the nation, according to a new report from the Insurance Fairness Project.
Colorado is currently the sixth most expensive state for home insurance, with homeowners paying an average of $3,412 a year for a standard policy covering a $300,000 home. That's compared to the national average of $2,424 per year.
Insurance is also becoming harder to get, with companies pulling out of high-risk areas in the state. Carriers who continue to offer coverage are raising premiums and tightening underwriting standards. Many homeowners report having fewer, costlier options than before, with some foregoing coverage or opting for bare minimum policies.
Colorado is a "dual-catastrophe" state, facing challenges from both wildfires and hail. Since 1990, the state has seen more than 76 weather-related disasters causing more than $1 billion in damages.
Many other states in the nation are facing the same challenges as Colorado, especially as climate change-driven weather events become more common. Between 2021 and 2024, the average annual home insurance premium in America increased by 24%. In high climate risk areas, homeowners are now paying about 82% more for insurance than people who live in lower-risk regions.
"Colorado's home insurance crisis offers a hard look at the calculus many states will have to consider in the coming years," said Grace Adcox, senior climate strategist at Data for Progress, on a press call about the report. "As extreme weather becomes more frequent, and more damaging and costly, home insurance will become inaccessible to working families without intervention."
While Colorado's insurance market is still in crisis, reforms the state has adopted could help provide a roadmap for the rest of the nation.
For example, HB 1182, which passed last year, requires insurance companies to consider wildfire mitigation efforts when determining risk and setting premiums. Insurers must also provide transparent, detailed information on the catastrophe and wildfire risk models they use and those models' impacts on rates. Other states, including New York and Washington, are considering similar bills.
"Colorado enacted the most important insurance law to pass last year, which requires the models used by insurers to take into account property, community, and landscape scale mitigation, for both pricing and underwriting — the decision whether to write or renew insurance," said Dave Jones, California's former insurance commissioner and current director of the Climate Risk Initiative at UC Berkeley's Center for Law, Energy and the Environment. "More states should do the same, to make sure that homeowners get an insurance benefit from the investments they and their local, state and federal governments are making in adaptation and resilience."
Photo credit: Jacob/Adobe Stock
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