People look at fire damage on Mulberry Street in Louisville, Colo., Friday, Dec. 31, 2021.
This may come as no surprise to homeowners, but the cost of Colorado鈥檚 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鈥檚 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 鈥渟ocial inflation,鈥� a term used by the insurance industry to describe the impact beyond regular economic inflation.
How Colorado compares to other states for cost of homeowners insurance
The cost of homeowners insurance nationwide has increased 7.1% since 2022, according to an analysis financial data site Bankrate did for The Colorado Sun. The impact of wildfires, hail and other weather-related damage aggravated by higher housing prices and lawsuits pushed average premiums 19.6% between 2022 to 2024. Utah had the highest, at 24.2%, followed by Florida's 21.4% and Louisiana's 20.5%. Hover on the dots to see average annual premiums for $300,000 worth of dwelling coverage. View .
鈥淭hat鈥檚 the increase in lawsuits and the amount of payouts from the lawsuits,鈥� Martin said. 鈥淧ublic opinion has changed on who鈥檚 really liable for these actions and how much money you should get in a lawsuit. 鈥� It鈥檚 impacting how policies are rated and how much they cost.鈥�
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 鈥渋nsurance carriers would be reassessing their appetite for wildfire risk (and) could have an impact on a material group of Colorado homeowners.鈥�
Colorado is ranked second in the nation for hail-damage claims and has a 鈥渉ighly litigious climate,鈥� said Carole Walker, executive director of the Rocky Mountain Insurance Association, a trade group that represents insurers. And nearly half of the state鈥檚 population lives in wildland-urban areas that include another one million people living in areas with 鈥渕oderate to very high risk of wildfire,鈥� 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.
鈥淲e truly are at a tipping point in Colorado,鈥� Walker said. 鈥�(Colorado) ranks second after California for risk of wildfire. 鈥� I think fears of what we鈥檝e 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.鈥�
According to the state鈥檚 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鈥檛 recall any insurers exiting Colorado yet but are reducing the number of policies on risky properties they no longer can afford to cover. She鈥檚 trying to make sure government restrictions and outdated regulations better balance insurer risk with availability of insurance for all Colorado households.
鈥淚f we stabilize the market, that鈥檚 what we鈥檝e all been working toward,鈥� she said. 鈥淧ut 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鈥檚 going to have a long-term impact on keeping insurers here (and) keeping those homes insurable.鈥�
According to RMIA, the average increase in homeowners鈥� 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 nonrenewals. The Fair Access to Insurance Requirements, or FAIR plan, is an 鈥渋nsurer of last resort鈥� 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鈥檚 market share. The policies should be available to homeowners and businesses in early 2025. But it鈥檚 just one 鈥渢ool in the toolbox,鈥� said Walker, who is on the state鈥檚 FAIR board.
鈥淎t the same time, I do think that people have to understand that insurance has been underpriced for homeowners when people haven鈥檛 had to use it,鈥� she said. 鈥淣ow that we鈥檙e using insurance more, it鈥檚 got to be balanced with what it costs to pay out claims.鈥�
As for the cost by state, Bankrate鈥檚 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.
鈥淚n 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,鈥� Martin said. 鈥淧eople in California now need home, fire, flood and earthquake insurance policies. It鈥檚 very expensive.鈥�
