Colorado property insurance costs have roughly doubled since 2020 placing Colorado in the top spot of insurance increases in the entire country. What is the top factor driving Colorado insurance rates much higher than the national average (it is not hail or fires)? Will the new Colorado Fair plan help homeowners with their insurance costs or will it increase costs for all property owners? It is crazy thinking about the losses from hurricanes that wipe out entire cities that Colorado is now topping almost every coastal market.
What was in the data on the huge spike in Colorado Insurance costs?
LendingTree ranks Colorado as the seventh most “unstable” home insurance market in the country, and premium hikes are hitting consumers, already struggling with rising property taxes, directly in the pocketbook.
In 2023, Colorado was only slightly above the national average with home insurance premiums of $2,584 a year. Now premiums run more than $1,000 above the U.S. average of $2,948, according to Insurify.
Colorado home insurance premiums averaged $3,032 at the end of 2024, a 17% increase from 2023, and were at $3,996 at the end of 2024, a 33% increase. Those premiums covered dwellings that averaged $324,724 in value.
Only five states had higher average home insurance premiums than Colorado last year. They include hurricane-prone Florida at $8,292; Louisiana at $5,050; Oklahoma at $4,962; Texas at $4,380, and Nebraska at $4,028.
Colorado homeowners have faced the biggest premium increases of any state, even though the loss ratio, or the amount of revenues that go out in claims, remains in the low 80% range, according to LendingTree’s analysis.
Why are Colorado’s insurance rates increasing faster than the national average?
There are four primary drivers of increased insurance costs in Colorado that are pushing premiums through the roof.
- Regulatory Burden: “Colorado tops all the lists nobody wants to be on,” said Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “We have a very challenging business environment.” Colorado has seen litigation costs and regulatory burdens around insurance rise, Walker said. Nearly $2 out of $3 paid out are due to “catastrophic” claims, putting the state into a category the industry calls a “hard” market.
- New Risks of Fire: Look no further than the Marshall fire in metro Denver that burned suburban areas and the losses are now pegged at 2 billion dollars. Before the Marshall fire, the risk was deemed low in many metro suburban locations, the Marshall fire changed that equation and forced insurance companies to reprice their risk throughout the state.
- Increase in Hail claims: There have already been several major hailstorms in Denver this year, as costs increase from Hail and other hazards, these are passed on to homeowners
- Skyrocketing rebuild costs: Rebuild costs continue to climb from higher labor to material costs, to increase building requirements. For example, to install a new hail resistant roof is now 50% more than a conventional roof, but the impact resistant roof is now the code minimum in many areas.
- Increased building in higher risk areas: Along with increased losses, the amount of construction in high risk foothill and mountain areas continues to increase which further increases the risk of losses to insurance companies.
Will insurance costs continue to increase in Colorado?
Yes! All of these risks look to only accelerate over the next several years which will unfortunately mean that insurance costs will continue to increase. At the end of the day, insurance companies have to be profitable or they will leave a market as we are seeing in California and Florida. This means that insurance companies must continue to increase their rates in order to remain profitable with the huge losses they are incurring in Colorado.
Will the Fair Plan help homeowners with their property insurance costs?
This year Colorado will start selling policies under the state run Fair Plan. The plan is only meant for property owners that cannot get coverage in the marketplace and can document 3 declinations from carriers. Essentially the fair plan is supposed to be an insurer of last resort with a maximum coverage of 750k for a home.
The Fair plan subsidizes property owners and does not address the root cause
Unfortunately the new state sponsored insurance agency will further subsidize property owners in high risk areas. A good example is the recent Marshall fire. A large cause of how quickly the flames spread were wood fences that created a “ladder” to the structure and ultimately destroyed many houses. One would think that with this knowledge when properties were rebuilt the should not have wooden fences. Unfortunately the opposite is occurring whereby many of the houses that are being rebuilt have installed wood fences. In other words, nothing has changed and a state run insurance program will continue to subsidize bad decisions.
Furthermore a state run insurance program will enable continued building in high risk areas whose costs will be borne by taxpayers. A state-run insurance program is a redistribution from lower risk properties to higher risk properties with no change in behaviors.
How will the Fair Plan impact Colorado’s insurance market? A Cautionary tale from Florida
We can look no further than Florida for what happens with a state run program. Florida’s insurer of last resort, Citizens Property Insurance Corps., predicts to hit a record with nearly 2 million policyholders by the end of 2023, citing “continued instability” in the state’s insurance market.
According to the Citizens’ 2023 Operating Budget Report, the insurer ended 2022 at just above 1,153,000 policies and they predict to reach the highest number of premiums in their 20-year history by the end of 2023 with nearly 1.7 million.
The insurer averaged about 400,000 policyholders prior to 2020, when the state’s property insurance market started to crumble with several private insurers either going insolvent or pulling out of the state.
In essence the state insurance program has taken a substantial number of people out of the private Florida insurance marketplace and made it unprofitable for many insurance companies. Remember insurance is a volume game with the objective to take in more from premiums than you pay out in claims. As the number of insured declines due to the state subsidizing property owners, private insurance companies are no longer viable.
Who pays for the Colorado fair plan and how much?
Anyone not in the state subsidized program will pay via higher rates and taxes/fees that will be needed in order to subsidize a high risk insurance pool. We have seen in Florida that costs have skyrocketed for insurance. The same will occur in Colorado as the fair plan is rolled out and insurers ditch high risk properties and focus on more profitable (aka lower risk) policies.
The legislature is the root cause of huge surges in insurance premiums
Colorado has the number one increase in property insurance costs in the entire country and the irony is that the major rise in premiums is self-inflicted and not due solely to actual losses. Colorado’s insurance marketplace has suffered huge increased regulations and litigation that ultimately increase insurance costs on everyone. Furthermore, Colorado is going the opposite direction with even more increased regulation and a state sponsored insurance plan that will keep Coloradoan’s insurance increasing faster than the rest of the nation for the foreseeable future.
Colorado’s plan to get into the insurance business is a bad solution to a problem that is not real. The overwhelming majority of property owners can obtain insurance at a price. The real reason that the state is getting involved in the insurance business is because property owners do not like the price of the new coverage. Remember, the price reflects the risk that insurance companies have and also creates incentives and disincentives in the market.
Colorado is on a collision course with the insurance industry and we have seen how this has played out in California and Florida with mainstream carriers leaving the market which in turn has forced more into the state run program. The same will ultimately occur in Colorado leading to substantially higher rates for most property owners.
Colorado has done very little to actually address the root cause of the insurance crisis which is increased regulation and increased risk from hazards. For example, the state could mandate that every new roof in Colorado must only use hail resistant materials and furthermore only non combustible materials could be used on siding (like concrete stucco, hardiplank, etc…). Furthermore the state could drastically limit building in high risk areas by imposing fees that are given to local fire jurisdictions that will have to defend these homes in case of fires.
Unfortunately we are just as the beginning of the costs increases in the property insurance market in Colorado. Look for more carriers to pull out and rates to continue rising by double digits until the state and/or local governments take concrete steps to address the regulatory burdens along with the risks like hail and fire by mandating changes.
Additional Reading/Resources
- https://www.denverpost.com/2026/04/02/colorado-home-insurance-costs/
- https://www.lendingtree.com/insurance/home-insurance-stability-study/
- https://coloradofairplan.com/faqs/
- https://www.durangoherald.com/articles/colorados-wildfire-risk-is-so-high-some-homeowners-cant-get-insured-the-state-may-create-last-res/
- https://coloradosun.com/2022/12/30/colorado-property-insurance-wildfire-risk/
- https://coloradohardmoney.com/category/colorado-property-insurance/
- https://coloradohardmoney.com/why-are-insurance-costs-increasing-in-colorado/
- https://www.steamboatpilot.com/opinion/writers-on-the-range-its-a-perfect-storm-for-fire-insurance/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Glen resides in Colorado, lends in Colorado, owns property in Colorado, and services loans in Colorado which provides a unique real estate prospective of what is actually happening on the ground both in Denver and throughout Colorado. My goal of this real estate blog is to provide an honest assessment of what I see happening in Colorado real estate and how it will impact real estate owners, buyers, realtors, mortgage professionals, etc…
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