If there’s one thing that goes up and doesn’t come down, it’s homeowners’ insurance. It’s not uncommon for policy holders to see their premium rates double or even triple with a renewal notice at the end of the year. So what gives? “Basically, Colorado is now considered a high-risk state when it comes to wildfire,” says Savanah Harding, Personal Lines Lead, Mamich Insurance Agency. “The big event that triggered this was the Marshall Fire. It was the straw that broke the camel’s back.”

The wildfire started in Boulder County Colorado on December 20, 2021, and quickly spread from a grass fire to become the most destructive fire in Colorado history in terms of the number of buildings destroyed. “The fire caused rebuild rates to double because of the increased demand,” Harding says. “The demand surge caused a shockwave through the industry.”

 

 

Harding says to understand the insurance industry, you have to look at the bigger picture, not just what’s going on in your own backyard. Insurance carriers are national corporations with policy holders across the U.S., so a major disaster affects everyone, not just homeowners in the area where the incident occurred. “Hurricane Ian was an eight-billion-dollar loss to the insurance industry. Each carrier is supposed to keep a percentage of premiums for its reserves, but when you have a major incident like that, it drains the company’s reserves, and that’s why they have to increase premiums, even here in Colorado.”

Harding says a common refrain regarding dramatic premium increases is “I’ve been with this company for 40 years and never filed a claim.” Unfortunately, the reality is an individual track record has little to do with premium rates.

The question is: what can a homeowner to save money when it comes to the rising cost of homeowners insurance?

Now that Colorado is considered a high-risk state because of wildfire, that’s going to be one of the biggest variables an insurance company is going to look at when determining the cost of protecting your home. The good news is there are things you can do. “Insurance companies want to see that you’ve created a defensible space around your home. Clearing brush. And cluster of trees should be at least 75–100 feet away from any structure and landscaping around your home should be neatly kept,” Harding says. Consider installing irrigation surrounding your home to protect it from wildfires and having a specialist come out to do an inspection or give recommendations on how to create a defensible space.

Another important thing to consider when purchasing a home is that its within five miles from a fire department. “Once you’re farther out in more rural areas coverage gets trickier,” Harding says. “Some companies simply won’t insure a property farther out, period.”

In addition to fuel sources close to your home, insurers will also look at the degree of slope your lot is on, as well as access—both characteristics that are typical for a lot of mountain homes.

With the increased risk and more complicated variables here in Colorado, Harding warns homeowners not to try to cut premium costs without consulting your agent because it may very well ending up costing you more in the long run, should something happen. “Just because you can get on app or website and buy a policy doesn’t mean you’re insured for what you think you are,” Harding says.

“When the Marshall fire occurred, we heard so many stories about people who believed they were getting screwed by their insurance company, but most likely they got online, built their own policy and were just trying to make it cheap and didn’t realize that cheap coverage also meant less coverage,” Harding says. “It’s important to work with an insurance agent who can walk you through how much a policy costs and what you carry so if you do experience a loss, you have someone you trust who can walk you through it.”

An insurance agent has a program to estimate your home’s replacement cost which is especially important in a luxury resort market like Steamboat where the cost of construction is constantly going up. “With our replacement cost estimator, we can get as specific as the replacement cost of each window or types of countertops and hardwood floors.” Harding says any high value item such as jewelry or artwork should be appraised and documented. There are even specialty insurance companies that will provide coverage for jewelry specifically—again, this is something an agent can look into for you to make sure you’re adequately covered.

There are still ways to cut costs, it just has to be done strategically. “One way to save is to do a split deductible, which means you have a separate deductible for wind and hail. Those types of claims are unlikely to happen here in Steamboat, so it can be separated from what is known from an ‘all perils’ deductible you’d use in the case of theft or fire. This can help keep the overall deductible cost lower,” Harding says.

If you are a buyer, keep an eye out for items that might make a home harder to insure. If the home has a retaining wall, make sure it’s vented for water so it won’t move or shift over time. Newer rooves are important too. “Most companies will not provide replacement coverage for a roof that is more than 20 years old. A roof that is 21 years or older may only be covered for its value before it was damaged.” It’s especially important to consider this if you’re looking to purchase a condominium. “Older condominium complexes might be cheaper, but keep in mind that insuring an older property is going to be a lot more expensive to insure,” Harding says. This is also often the reason HOA dues rise dramatically, is because of the cost of insurance.

If your rates go up, you definitely want to shop around. Just make sure you don’t sacrifice your coverage for a lower premium. “That’s when you want to have an agent who understands the industry and can tell you ways to save,” Harding says. “It’s a tricky balance.”  //mamichagency.com

For information on how to prepare your home for wildfires > click here <