Notable for its diverse geography, Colorado is home to almost 6 million residents. Continually enduring extreme conditions, the state is known to have mountains, foothills, high plains, and desert lands. The diversity of the land is a unique challenge for homeowners insurance from the varying risks. Insurance companies have dually noted the constant changes by increasing rates, denying coverage, and even cancelling coverage on renewal in order to maintain profitability due to these high risk issues and the volume of claims filed.
The Eastern region or Colorado lies in Tornado Alley. These storms cause extreme wind damage to properties. As time goes on, it is becoming more and more clear that mitigation is the best decision for homeowners so they make the necessary updates to their home before having to file repeated homeowners insurance claims for the same loss. Susceptible to occasional flooding, the Eastern part of the state regularly deals with rapid melting of snow in the mountains causing a noticeable rise in flood claims for those in higher risk areas.
Meanwhile, the Northern part of Colorado experiences sub zero temperatures flowing down from the mountains, often causing water insurance claims due to freezing pipes. Aside from the harsh winters the Northern part of the state has had the biggest hail storms in the state. Hail damage causes insurance companies millions of dollars a year in claims.
The majority of the state is considered very dry. Averaging only 17 inches of rainfall a year, it is not uncommon for part of the state to be flooding while another portion of the state reflects drought conditions. Lack of regular rainfall in many areas contributes to the occurrences of wildfires in the state. Halfway through the summer of 2018, roughly 1,585 wildfires ignited more than 431,600 acres of Colorado forest and grassland. This tragedy cost nearly 450 homeowners their homes and millions of dollars in homeowners insurance claims for these high risk properties.
Despite Colorado not having a State FAIR Plan, the private market continues to thrive with a competitive and healthy environment. Over time the insurance market will continue to respond to the events that cause claims and mitigating the potential for loss will become more important.