Colorado Homeowners Face Urgent Crisis: 74% Underinsured After Fires

URGENT UPDATE: A staggering 74% of homeowners affected by Colorado’s devastating Marshall Fire are underinsured, according to alarming new research from economists at the University of Colorado Boulder. The study reveals that the majority of homeowners lack sufficient insurance coverage to fully rebuild their homes, raising urgent concerns over financial security in the wake of natural disasters.

The Marshall Fire, which swept through suburban Boulder County, destroyed over 1,000 homes in 2021. With insurance premiums in Colorado soaring nearly 60% over the last five years, many homeowners are left unprotected against rising rebuilding costs. This crisis is not only a local issue but reflects a broader national trend of inadequate coverage amidst increasing natural disaster risks.

Using contract-level data from 3,089 policies held by those affected, researchers found that 36% of homeowners were so severely underinsured that their policies covered less than 75% of the rebuild costs. Shockingly, even among households earning over $180,000, 72% held policies that fell short of covering the full replacement costs.

The study indicates that many homeowners mistakenly focus on the headline premium rather than the actual coverage provided. Approximately 87% of the policies studied included extended coverage designed to account for rising construction costs, yet nearly 75% of these still failed to ensure adequate protection.

The implications are dire. When insurance coverage fails to meet rebuilding costs, families are far less likely to reconstruct their homes. The research suggests that if all underinsured households had sufficient coverage, 25.4% would have applied for reconstruction permits within a year, compared to only 18.8% who did file. Moreover, the number of homeowners selling their properties post-fire could have been significantly lower, dropping from 9.7% to 5.4%.

Experts emphasize the need for homeowners to take action NOW to safeguard their financial futures. Here are essential steps to consider:

1. **Request Side-by-Side Comparisons**: When renewing or obtaining quotes, homeowners should demand comparisons that maintain the same coverage limits across insurers, ensuring they do not underinsure in search of lower premiums.

2. **Reassess Coverage Regularly**: Homeowners are urged to revisit their coverage limits annually, especially after renovations or significant economic changes that impact construction costs.

3. **Choose Wisely**: Selecting an insurer with a strong local presence may reduce the chances of underinsurance, as these companies are often more attuned to community needs.

As the Front Range braces for future wildfire seasons, the urgency for homeowners to secure adequate insurance coverage is critical. The rising risks from wind, drought, and human activities necessitate a proactive approach to insurance shopping and policy renewals.

The consequences of underinsurance are not abstract—they manifest in the form of families displaced from their communities. As the research highlights, the stakes are high: protecting homes means protecting lives. Homeowners must act decisively to ensure they are not left vulnerable in the face of future disasters.

For ongoing updates on this developing story, stay tuned.