Colorado Home Insurance Rates Surge Amid Rising Wildfire Risks

Home insurance premiums in Colorado have seen significant increases in recent years, driven primarily by a rise in extreme weather events like wildfires and hail. In the last six years, rates have surged by over 76%, with projections indicating an additional 11% increase in 2025, potentially pushing the average annual premium above $6,000. This escalation positions Colorado as the state with the fourth-most-expensive home insurance rates nationwide.

Approximately 300,000 homes in Colorado face wildfire risk, contributing to insurance companies' heightened risk assessments and rate hikes. These premium increases are leading to affordability challenges for homeowners, resulting in a growing number of uninsured homes, currently estimated at around 10% due to the prohibitive costs of coverage.

The insurance market is also experiencing contraction, with some carriers withdrawing from high-risk areas entirely, which raises concerns about coverage availability and financial risk for property owners. This situation may prompt demographic shifts as homeowners seek locations with more favorable insurance rates and lower extreme weather risks, potentially impacting housing and insurance markets in other states.

In response to these challenges, Colorado is exploring regulatory and financial interventions to stabilize the market. Proposed measures include a 1% policy fee intended to fund risk mitigation and recovery programs addressing weather-related damages. Additionally, legislative efforts such as House Bill 1182 aim to regulate insurers' risk model usage, while House Bill 1302 proposes funding for reinsurance and grants to enhance property resilience against wildfires and hail.

These initiatives are part of a broader effort to maintain insurance availability in the state and mitigate the impact of environmental risks on homeowners and insurers alike. The evolving landscape underscores the critical interplay between climate-driven risk factors and insurance market dynamics, highlighting the importance of regulatory frameworks and risk management strategies in sustaining housing market stability.