Urgent Alert: 74% of Colorado Homeowners Underinsured After Fires

UPDATE: New research reveals a staggering 74% of homeowners affected by Colorado’s devastating Marshall Fire are underinsured, leaving many families vulnerable in the aftermath of disaster. This urgent finding highlights a significant risk for homeowners across the state, where nearly 1,000 houses were destroyed in the fire.

Just released data shows that 36% of these homeowners have policies that cover less than 75% of their rebuilding costs. This alarming trend affects not only low-income families but also those with incomes exceeding $180,000. In fact, 72% of high-income households are also inadequately covered.

The analysis of 3,089 policies from 14 major insurers reveals that many homeowners are ill-prepared for the rising costs associated with rebuilding. As insurance premiums in Colorado have surged nearly 60% over the past five years due to increasing wildfire risks, many policies fail to provide sufficient coverage.

“Underinsurance isn’t just a statistic; it affects real families and their ability to rebuild,” state the researchers, Tony Cookson and Emily Gallagher from the University of Colorado Boulder. They emphasize that the choice of insurer plays a crucial role in determining coverage levels, which often leaves families facing tough decisions after disasters.

The report also indicates that while 87% of the policies included extended replacement cost coverage, nearly 75% of those still fell short of the necessary rebuilding funds. This disparity demonstrates that homeowners are not only underinsured at the outset but are also ill-equipped to handle the inflation of construction costs that typically follows a major disaster.

The implications are dire: if all underinsured households had adequate coverage, an estimated 25.4% would have pursued reconstruction permits within a year of the fire, compared to only 18.8% who did. This means hundreds of families could have rebuilt and remained in their communities instead of selling their properties, which 9.7% did by the end of the first year.

As Colorado faces ongoing wildfire risks, experts urge homeowners to take immediate action. Here are crucial steps to ensure adequate coverage:

1. **Request Comprehensive Quotes:** When shopping for insurance, homeowners should insist on side-by-side comparisons of coverage limits across insurers to avoid underinsuring for the sake of lower premiums.

2. **Annual Reassessments:** Regularly revisit insurance coverage, especially after renovations or significant economic changes that may influence construction costs.

3. **Choose Wisely:** Consider the reputation and local presence of insurance companies, as those with deeper roots in the community are less likely to underinsure properties.

With wildfire seasons expected to intensify, homeowners are encouraged to treat their insurance policies as if a total loss could occur at any moment. The research underlines that proactive measures can significantly enhance financial preparedness and community resilience in the face of disasters.

Stay informed and protect your home before it’s too late.