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3 Tips for Colorado Homeowners in a Shifting Insurance Landscape Thumbnail

3 Tips for Colorado Homeowners in a Shifting Insurance Landscape

Investor Insights

Written by guest contributor Andy Orlando  

The recent developments involving major insurance carriers halting new homeowners policies in states like California and Florida due to escalating claims and reinsurance costs have underscored the changing landscape of the industry.

Colorado is no exception to these industry shifts as it ranks second in the nation for hail insurance claims and among the top five for wildfires. In fact, Colorado has experienced a staggering 275% increase in natural disaster occurrences over the past two decades.

We find ourselves in the early innings of a hardening insurance market; with tighter underwriting and rising premiums as carriers grapple with losses stemming from unprecedented catastrophic events and financial pressures. 

Despite this challenging environment, there are steps you can take to position yourself favorably, safeguard your assets, and manage your homeowners insurance premiums. 

Tip #1: Exercise Caution in Reporting Claims and Invest in Preventive Measures

A well-structured insurance program should be designed to shield you against catastrophic events. When confronted with minor claims, speak with your insurance advisor about the long-term impact of reporting such claims to your insurance provider before opening a new claim.

By adopting a proactive approach and investing in resources and features that protect your home will yield benefits as insurers are prioritizing families who minimize their risk profile by implementing the following features:

  • Centrally monitored fire and burglar alarms
  • Automatic water shut-off devices
  • Electrical surge detectors
  • Clearing trees and vegetation in wildfire-prone areas
  • Updating outdated plumbing and electrical systems
  • Replacing older roofs (20+ years) with newer, higher-quality materials

Tip #2: Opt for Higher Deductibles

Selecting higher deductibles is the most immediate method to manage your insurance premiums. Consider opting for $5,000 or $10,000 home deductibles. Given Colorado's recurrent hail events spanning over a decade, it has become industry-standard for mandatory wind and hail deductibles, ranging from 0.5% to 2% of the home's insured value.

Tip #3: Insure Your Home to Value

What would it cost to rebuild your home in 2023? That should be the coverage amount you carry. It is crucial to recognize that Home Replacement Cost and Home Market Value are independent values, and the replacement cost can often surpass the market value, particularly for older homes. Unfortunately, many families discovered their homes were substantially underinsured following the Marshall Fire outside Boulder, resulting in six-figure out-of-pocket expenses to bridge the coverage gap.

Several carriers, including Chubb, PURE, Berkley One, and AIG Private Client Group, offer Guaranteed Replacement Cost policies. These policies ensure that there is no capped limit on the amount the carrier will cover in the event of a total loss. Families should prioritize such policies, especially for multi-million dollar properties.

An Investment in Your Home is an Investment in Your Future Insurability

Taking proactive steps to improve your risk profile will present better to carriers and can result in stronger coverage and premium options, especially in dynamic insurance markets like Colorado.

Content for this article was provided by Andy Orlando at CCIG Private Client Group (andy.orlando@thinkccig.com).

Securities offered through American Portfolios Financial Services, Inc., Member: FINRA, SIPC. Advisory services offered through American Portfolios Advisors, Inc. and Novem Group, Inc., SEC-Registered Investment Adviser firms. American Portfolios Denver, Inc. and Novem Group, Inc. are independent of each other and independent of American Portfolios Financial Services, Inc. and American Portfolios Advisors, Inc.