Colorado Homeowners Face Urgent Risk of Underinsurance: Study Reveals

UPDATE: New research reveals that 74% of homeowners in Colorado are facing the urgent risk of being underinsured, particularly those affected by the devastating Marshall Fire that destroyed over 1,000 homes in Boulder County. This alarming statistic underscores a growing crisis as homeowners are left unprepared to rebuild their lives following catastrophic losses.

The study, conducted by economists from the University of Colorado Boulder, analyzed 3,089 insurance policies held by Marshall Fire victims. The findings show that 36% of these households are so severely underinsured that their coverage falls below 75% of the actual rebuilding costs. This situation is not limited to lower-income families; even those earning above $180,000 are struggling with inadequate insurance.

The research highlights a significant shift in the insurance landscape, as premiums in Colorado have surged nearly 60% over the past five years due to increasing losses from wildfires and other disasters. Homeowners are now grappling with the consequences of this trend, which is reflective of a national reassessment of risk.

While 87% of the policies studied included Extended Replacement Cost coverage—designed to protect against rising rebuilding costs—nearly three-quarters still fell short. The data indicates that even with this additional coverage, the fundamental issue of underinsurance remains unresolved.

The impact of underinsurance is profound. Households lacking adequate coverage are significantly less likely to rebuild after a total loss, with many forced to sell their properties and leave their communities. The study revealed that if all underinsured households had been fully insured, 25.4% would have sought reconstruction permits within a year post-fire, compared to just 18.8% who actually did.

Authorities stress the importance of reassessing insurance coverage regularly. Homeowners are urged to make informed decisions when selecting insurance policies, ensuring that they are not solely focused on lower premiums but also on the extent of coverage provided.

In light of these findings, experts recommend practical steps for homeowners to safeguard their investments. When obtaining quotes or renewing policies, homeowners should request side-by-side comparisons that maintain consistent coverage limits. Additionally, homeowners should revisit their coverage limits annually, especially after renovations or significant economic changes.

The urgency of the situation cannot be overstated. With wildfire seasons continuing to pose a threat to the Front Range, homeowners must act now to ensure they are adequately protected against future disasters. Insurers vary significantly in their coverage levels, making it vital for homeowners to shop wisely and consider insurers with strong local ties.

As the fire season looms, the message is clear: Colorado homeowners must prioritize adequate insurance coverage—because tomorrow’s disaster could strike at any moment.

For more insights on how to navigate this critical issue, homeowners are encouraged to consult the full study conducted by Tony Cookson and Emily Gallagher from the University of Colorado Boulder. The consequences of underinsurance are real, and proactive measures today could mean the difference between recovery and loss tomorrow.