Colorado homeowners continue to face numerous challenges in the housing market, including a fiercely competitive real estate market, high interest rates, and skyrocketing property taxes. Now, they must also contend with surging home insurance rates, which are further eroding the landscape of affordable housing options in the state.

Reports indicate that Colorado homeowners have experienced premium increases ranging from approximately 30% to over 130% in just the past few years. Many individuals have received the unfortunate news that their policies will not be renewed, while some insurance companies have decided not to write new policies to mitigate their risks. Condo owners are particularly hard-hit, as soaring premiums for homeowners associations have led to special assessments and higher dues.

Carole Walker, executive director of the Rocky Mountain Insurance Information Association, acknowledged that Colorado is currently facing one of the most challenging property insurance markets in a generation. Several factors contribute to these rising costs, including higher inflation, increased costs of building materials and labor, and insurance-related lawsuits.

Furthermore, the escalating number and severity of natural disasters and wildfires have had a significant impact on insurance costs. Insurance companies conducting business in Colorado reported the fourth-highest losses in the country over the last five years. Walker noted that the international impact of climate change and the severity of climate disasters have caused reinsurers, the companies that provide insurance to insurance companies, to reassess their exposure and increase their premiums.

Colorado ranks second in the nation for hail-damage claims and is second only to California in terms of the number of homes at risk from wildfires. Although Colorado has not seen a widespread refusal of companies to write new policies like California, there is a growing trend of some companies not renewing policies in areas prone to wildfires or other disasters, leaving affected homeowners struggling to find coverage.

The real estate industry is feeling the effects of escalating home insurance premiums and reduced coverage. Agents are witnessing properties losing coverage or struggling to find insurance, which disrupts an already strained market. Real estate agents are working diligently to find coverage for their clients, but rising rates pose challenges, particularly for those on fixed incomes.

To address the mounting issues, the state of Colorado is in the process of establishing an insurer of last resort, known as the Fair Access to Insurance Requirements (FAIR) plan. This plan, which will be funded by assessments on the insurance industry, aims to stabilize the market by shifting some of the high-risk policies. However, the FAIR plan is not expected to be operational until 2025, and applicants must have been turned down by at least three carriers.

The cost of insurance for homeowners associations (HOAs) has also become increasingly burdensome. Many HOAs are forced to seek coverage from non-standard carriers that charge exorbitant rates with higher deductibles, as more traditional insurers have exited the condo business due to concerns about construction-related lawsuits and liability risks.

As Colorado continues to grapple with rising home insurance rates, stakeholders are calling for increased transparency, better understanding of the modeling used by insurance companies to assess risk, and solutions to ensure housing affordability for residents.

The struggle homeowners face in obtaining affordable and comprehensive insurance coverage underscores the urgent need for comprehensive solutions to address the challenges of the Colorado housing market, which has become increasingly competitive and expensive in recent years.