Climate threats lead to huge jumps in Colorado home insurance rates, and the state is seeking solutions
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DENVER — On May 20, 2024, tornado sirens blared throughout the small eastern plains town of Yuma as hail the size of baseballs thrashed trees and homes.
"Mother nature was brutal," said Keven Means.
The storm lasted less than an hour, but by the time it was over residents were wading through ice-choked streets and the town of 3,400 was reeling.
Means, who was born and raised in Yuma, is a local contractor, and has been working nonstop repairing homes since the storm. He estimates that 99 percent of roofs were destroyed, even the ones with the most hail-resistant building materials.
Yuma has experienced its fair share of hail storms over the years, but this latest one exacerbated one issue in particular — the shaky state of homeowners insurance.
“When our insurance renewed this year, it went up about $2,000,” said Megan Hansen, who lives in Yuma.
“There's a lot of insurance that won't cover this area,” said Julie Jamison. “We have to either stay with what we've got or there's a lot of people that can't afford the insurance.”
Stories like those from Yuma and the Marshall Fire have caught the attention of the Colorado legislature and Gov. Jared Polis. But they are wrestling with how best to get involved in the insurance marketplace whether through regulation, incentives, or a little bit of both.
“We are in the most challenging property insurance market that we've seen in a generation.” said Carole Walker, an insurance industry lobbyist and head of the Rocky Mountain Insurance Association.
“So what we’ve really seen play out in Colorado is, unfortunately, a lot of pressure on the insurance marketplace here, which puts pressure on those individual homeowners,” she said.
Yuma’s experience is an extreme example of impacts being felt by homeowners across the state.
In the last five years the average premium in the state has gone up 65 percent according to the National Association of Insurance Commissioners. Colorado is now one of the top ten most expensive states in the country for homeowners insurance.
Climate experts say that is partly a result of more frequent and damaging weather driven by a warming planet.
Video: Rocky Mountain PBS
Dual catastrophe state
Florida is well-known for its hurricanes and floods — California for its earthquakes, mudslides and wildfires. But Colorado is no slouch in the natural disaster arena either. It’s what’s known in the insurance industry as a “dual-catastrophe” state dealing with both wildfires and hail. And Coloradans love of nature contributes to the challenge.
Almost half of the state's population lives in what’s called the wildland urban interface — areas where homes and businesses butt up against forests and open spaces — making them vulnerable to wildfires. On top of that, the Front Range and Eastern Plains experience frequent hailstorms, some parts have earned the unenviable nickname “Hail Alley.”
Since 1980, Colorado has had more than 76 weather-related disasters — including fires, storms, hail and floods — that each caused more than $1 billion in damages. And it's getting worse — most of those disasters occurred in the past decade.
Climate change isn’t the only reason billion dollar disasters are happening more frequently. More people live in Colorado now, and the cost of replacing buildings and property after disasters just keeps increasing.
Each disaster adds up for insurers — who pass those costs on to their policyholders. According to state figures, hail damage to homes is the biggest driver of those costs. On average, 60 to 70 percent of the amount of premium that people pay across the state is from hail risk, even in places that don’t get hail.
Escalating rates are something that state lawmakers, like Boulder Senator, Democrat Judy Amabile have started really worrying about.
“When we talk about the cost of housing, we have to talk about insurance as part of that,” Amabile said. “That is absolutely, becoming a significant part of somebody's monthly cost to own the home or to rent, because those costs are going to get passed through one way or another.”
Since 2007, rates in Colorado have gone up 233 percent, according to the Insurance Information Institute, and the rates are higher in Colorado than states like California and North Carolina.
“It's a major crisis in Colorado and a number of other states, in that insurance costs for homeowners has gone up far above the rate of inflation,” said Gov. Jared Polis.
In addition to costs, Polis is worried about availability.
“We also have many homeowners who have a lot less choices, even some down to one choice, and to insure with less competition also means higher rates,” Polis said. “So it's become a major problem.”
Currently, Polis and Colorado’s Insurance Commissioner Michael Conway said they don’t think companies will wholesale leave the state.
“I'm concerned that some insurance companies may make choices not to write in certain parts of the state, not to provide coverage in certain parts of the state, and that will drive up the affordability challenges in those parts of the state,” said Conway.
That is already happening, as pockets of Colorado become insurance deserts.
Insurance agent Steve Hakes said companies are scaling back in certain zip codes.
“This one's actually Allstate,” Hakes said, pointing to a spread sheet of zip codes in Boulder county. “You've got three columns of zip codes that are simply ineligible to be written in any of those particular areas.”
The FAIR plan
In 2023 state lawmakers, with broad bipartisan support, created state-backed coverage for properties at extreme risk of disaster that were rejected by three different insurance companies. It was an effort to stabilize the housing market, and the program officially launched in April.
The FAIR plan is more expensive than traditional insurance policies, and the payouts are also limited, capped at $750,000. If a home is worth more than that and it burns down, the Fair Plan would not cover all the losses.
The idea isn’t unique to Colorado. States like California and Washington first started offering plans like this in the late 1960s and there are now FAIR plans in more than 30 states.
As of this December, eight months after the program’s launch, Colorado’s Fair Plan had sold about 140 insurance policies.
“When we started with the fair plan, our hope was that no one would ever need it,” said Amabile, who sponsored the legislation. “But we are already seeing that people do need it. And I would expect that number will grow dramatically in the next few months as people hear about the Fair Plan and as more insurance companies start to turn people down.”
Underinsurance
Despite the benefits, the FAIR Plan does raise the risk of underinsurance - and that’s a problem some homeowners with private insurance have faced for years.
The issue was front and center after the Marshall fire in Boulder County, the state’s most destructive wildfire. An estimated three-quarters of people who lost their homes in the fire didn’t have enough homeowners insurance to cover rebuilding costs.
That's exactly what happened to Manu Sobti, his wife Amita and their two children. They live in Superior, a suburb of Boulder and moved into their house a decade prior. Before the Marshall fire, they thought their homeowners insurance was sufficient.
Manu remembers the day of the fire clearly. It was in late December 2021 he and family were on a beach vacation in Mexico enjoying their kids’ winter break when they started hearing that their subdivision was on fire.
“The early morning we had breakfast and suddenly the calls and texts start coming in that, ‘hey, man, where are you guys?’”
Manu and his family watched the whole thing unfold from the ring camera on their house.
“Being that far away was definitely helpless. You couldn’t do anything.”
It turns out losing their home was just the beginning of a long and arduous saga. They decided to rebuild in the same location and stay in the community that they grew to love.
But as they re-built they soon realized how underinsured they were. Manu said they ended up spending $1 million more than what their insurance paid — half for the rebuild, and half to replace all the items that burned in the home.
Manu said his insurance company treated him fairly, the company paid what he was owed under his policy but it just didn’t come close to covering everything he lost.
“The concept of insurance is there. You feel safe. At least this covers you a bit, but it's still a big financial liability to be able to build back.”
The couple decided to build what’s called a passive house — a home that is more energy efficient and fire-resistant. While it costs more to build a passive house, Sobti said even if he hadn’t rebuilt his home that way, he would still be significantly underinsured.
Underinsurance is common. One study found more than half of homeowners in California and Colorado are underinsured. This can happen for a variety of reasons such as not updating a policy after a big renovation; failing to include expensive items like jewelry or artwork in an insurance plan; and not adding supplemental coverage, known as extended replacement cost, into a policy in case rebuilding costs end up higher than expected.
After the Marshall Fire, lawmakers passed a bill to address underinsurance. It requires the state to create an annual report on estimated rebuilding costs, and requires insurers to be more upfront about those costs in their policies. Insurance companies are also required to offer more comprehensive supplemental insurance options.
Policy solutions
Sufficient insurance is only one part of the puzzle — lawmakers are also trying to make insurance more affordable. One way to do that is through mitigation.
Gov. Polis had a proposal last legislative session to set up a grant program to help people buy hail resistant roofs, often known in the industry as class 4 shingles.
“At the end of the day, the more hail-proof roofs we have, especially in the Eastern Front Range, Aurora, East Denver, the lower rates are going to be for everybody,” Polis said.
The bill would have set up a fund, paid for by a one percent fee on every homeowners insurance policy. That money would have paid for two things: grants for hail resistant roofs and money for insurers to help offset their losses in wildfire prone areas.
The proposal didn’t garner enough support from state Republicans or Democrats. The big sticking point was the fee on homeowners to fund the program, amid concerns that it took too much money out of people’s pocketbooks.
The Polis administration plans to reprise this bill this session and potentially look at other ways to fund it. Democratic House Speaker Julie McCluskie of Dillon will be a main sponsor and said it’s a top priority made extra challenging by the lack of money in the state budget.
“We've just seen our revenues drop dramatically, and that means that these very important programs that we're trying to get off the ground, we've got to find funding and resources for them in other ways, and we're committed to doing that.”
Polis’ proposal for a roof enhancement program is an example of mitigation — the idea that people must be proactive to try to limit damage to their homes — and help reduce insurance claims.
“When we're talking about bringing down insurance premiums, I think what we really have to be talking about is how do we reduce the risk?” said Walker. Part of the effort is finding ways to get people to do the mitigation work.
“You need to do the mitigation. Your neighbor needs to do it, and then it needs to be at scale. Because we know for wildfire, fire doesn't care. It doesn't know any boundaries. So I think the commitment we need as a state is how can we put these mitigation programs in place?”
In 2025 Colorado passed a law requiring insurance companies to be more transparent about how they calculate rates in wildfire prone areas. Companies are now required to explain different ways homeowners can mitigate to lower their wildfire risk, and potentially their rates.
Some communities in Colorado are already at the forefront of mitigation. Wildfire Partners, a Boulder County run mitigation program started a little more than a decade ago. Since then it’s performed more than 4,000 home assessments. The county sends specialists to homes to work up a laundry list of actions to take, from creating a 5 foot buffer around the house, to cleaning debris off the roof.
“Every year we have more and more interest from our residents as wildfire risk increases and people see on the news in Los Angeles or other fires from across the country. They recognize that with climate change and our new era of climate driven wildfires, they need to take action,” said Wildfire Partners program manager Jim Webster.
Boulder’s program also offers a certificate to homeowners who have completed all of the necessary mitigation work — and that can be really important to insurance companies.
It ended up being critical for Nick Schneider and his wife Erica Ellingson, who live in a scenic valley just outside of the town of Lyons surrounded by hills and prairie grass. They have a wooden house with cedar siding and knew they needed to take action to protect their property, but like a lot of people, they kept putting it off.
“I will admit it, I was the foot dragger. I just didn't want to hear that we were going to have to, you know, pave the whole area around the house, cut down favorite trees or anything like that,” said Schneider.
But that all changed in December 2023 when their insurance company reached out.
“We got the letter from our insurance company that said: We will not renew your insurance because of the risk of wildfire. And so, of course, we panicked,” said Ellingson.
The couple turned to Wildfire Partners for help and put in long hours removing brush and grasses around the house and fortifying their wooden decks. They tackled the yard, but were still able to keep some of their favorite trees and have a beautiful garden.
They were also able to keep their insurance. Boulder county certified their work, and the insurance company renewed their policy.
That mitigation couldn't have come at a better time. Just a few months after mitigating, in July 2024, a wildfire known as the Stone Canyon Fire, ripped right through their neighborhood.
“It was very surreal when I looked out the window and I saw the trees on fire so close to the house. I couldn't believe it for a moment,” said Ellingson.
The wildfire approached the home from all sides, but the flames receded as they hit the defensible barrier.
The fire ended up taking five homes, but not Nick and Erica’s, and not any of the other nearby homes that Wildfire Partners certified as mitigated.
“If we hadn't gotten that kick in the pants from our insurance company, we wouldn't have dealt with [it] in time,” said Schneider.
Implementing large scale mitigation programs and getting a lot of homeowners to do it, however, is not an easy task. It costs money, takes time (approximately 100 hours, according to Webster) and effort. In 2022, voters in Boulder County approved a tax to help fund the program, something that would be politically untenable in some parts of the state.
So far the state said it has no immediate plans to mandate mitigation work, or require insurance companies to offer a discount for doing it. But this is Polis’ last session — so it’ll likely be up to the next governor to decide if this is the direction Colorado should go.
Ellingson said their experience taught them that programs to make homes safer really work.
“For certain, our house would have been lost in that fire,” she said.
This story was produced as part of the Colorado Capitol News Alliance. It first appeared at cpr.org and rmpbs.org.
To learn more about Colorado’s home insurance dilemma, watch the documentary “Undercovered,” a collaboration between Rocky Mountain PBS and Colorado Public Radio here. The film airs Thursday, January 15 at 7pm MST.
You can also listen to CPR's recent podcast episode exploring the state’s home insurance industry on Purplish.
Type of story: News
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. To read more about why you can trust the journalism of Rocky Mountain PBS, please visit our editorial standards and practices page.
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. To read more about why you can trust the journalism of Rocky Mountain PBS, please visit our editorial standards and practices page.