Homeowners in Boulder are seeing their home insurance premiums soar — or coverage disappear entirely — as climate risks escalate. The rising costs are forcing some to reconsider whether they can afford to stay or rebuild after a disaster.
State leaders are working on solutions, including a new state-backed insurance option for those Coloradans shut out of the private market, limits on insurer profits and fire risk modeling reforms aimed at lowering premiums. But relief isn’t coming fast enough for some.
Boulder Reporting Lab heard from more than 20 residents across Boulder County — including in Boulder, Superior, Nederland, Erie, Lafayette and Longmont — who recently lost coverage or saw premiums spike. Half saw their premiums double; for a few, they nearly tripled.
At least six homeowners in or near the City of Boulder’s wildland-urban interface said their insurers dropped them entirely. Some were told it was due to wildfire risk; others received no explanation. One homeowner, despite having a fire risk score of zero, was still dropped. Some companies have also stopped covering more expensive homes.
Kristina Miller Olsen, who lives with her husband and twin 12-year-olds in Boulder’s Knollwood neighborhood, was dropped by Nationwide last year when the company stopped insuring homes valued over $1 million. She bought her home in 2007 for just under $1 million. Now, Zillow estimates it at more than $3.5 million.
Her home backs up to open space, raising both its value and wildfire risk. Olsen fears that if a fire destroys her home, her insurance payout won’t cover the cost to rebuild.
“That worries me, because we have a fair amount of retirement savings in our property valuation,” she said.
She eventually found a new policy through State Farm, but her premium more than doubled, jumping from $4,510 to $11,947.
“Coupled with our property taxes, the ability to afford where we live is decreasing rapidly,” she said. “It stresses me out. If this rate continues to rise, it’s an uncontrolled expense.”
Olsen met with a city Wildfire Partners specialist for advice on affordable fire mitigation, like adding metal barriers near her deck and removing a neighbor’s wooden fence. She plans to make the changes this spring but doubts they’ll impact her premium.
The strain is deepening Boulder County’s affordability challenges. Peggy Taylor, a 66-year-old nurse who lives in Coal Creek Village in Lafayette, is questioning whether she can continue to afford to stay in her home. Her HOA fees — which include insurance — jumped from $130 to $530 after the community’s insurance premiums doubled.
Taylor, who planned to retire soon and live on $1,800 in social security, would be left with just $330 a month for other expenses after paying her mortgage and HOA fees.
“That’s not going to cut it,” she said.
A statewide insurance crisis
The problem extends beyond the Boulder area. Statewide, the average homeowner’s premiums rose 52% between January 2019 and October 2022, according to the Colorado Division of Insurance. And about 1% of Colorado homeowners are now seeing their policies dropped — a rate that was once rare but has become standard nationwide, according to the Colorado Sun.
Colorado insurance companies are losing money and blame higher premiums on inflation, fraud and regulations that drive up disaster rebuilding costs. But climate change is a major factor, too. Colorado’s hailstorms are hitting harder and more often, and now make up 50% to 60% of insurance claims, according to state insurance commissioner Michael Conway. Meanwhile, wildfires are becoming more frequent, destructive and costly.
Nationwide, insurance costs are rising faster than home values, weakening homeownership as an investment. Climate risk research firm First Street predicts that more than 5 million Americans will relocate this year due to climate threats, with 50 million more expected to move in the next three decades.
What is Colorado doing to lower home insurance costs?
State leaders are working on several measures to stabilize the market and lower costs:
- Fire risk modeling reform: A proposed bill (HB 1182) would require insurers to update wildfire risk models more often, account for community-wide mitigation efforts and allow homeowners to appeal their risk scores, which state officials say should lower premiums. Currently, Conway said, insurers aren’t fully factoring in local and state fire prevention work.
“We’ve been telling communities for years, for decades, that they really need to mitigate their community in order to make homeowners’ insurance more affordable and more available,” Conway said. “So if the models aren’t incorporating that mitigation, it’s unacceptable.”
If passed, HB 1182 could ease costs for City of Boulder homeowners affected by a coming city ordinance requiring some to implement home-hardening measures. It could also help those already taking steps to reduce fire risk, like Olsen.
- Limits on insurer profits: A draft bill from Boulder state Sen. Judy Amabile and others would help limit how much profit insurance companies in Colorado can make by setting a “loss ratio requirement.” This rule ensures insurers pay out a certain percentage of the premiums they collect in claims.
To stay profitable, insurers generally need a loss ratio below 80%, paying out less than 80 cents for every dollar collected. The remaining 20% or so covers administrative costs and profits. If the ratio is too high, insurers lose money. “If they’re north of a dollar, they’re losing a lot of money,” Conway said.
If the ratio is too low, insurers may be overcharging customers.
- Hail and wildfire protection programs: The legislation would also create grants to help homeowners fortify roofs against hail and establish a wildfire catastrophe reinsurance fund to reduce risk for insurers, encourage competition and stabilize rates.
A new state-backed insurance option for homeowners shut out of the market
For those who have already lost coverage, the state is launching a last-resort Fair Access to Insurance Requirements (FAIR) Plan by the end of March. The program will cover high-risk properties, with major insurers sharing the cost burden.
However, FAIR Plan premiums won’t be cheap. The law requires them to be “actuarially sound,” Conway said, meaning they must charge enough to cover the risk.
The plan will insure homes for up to $750,000 in damages. Those needing more coverage will have to turn to wrap policies on the private market.
One risk: If a major disaster, like another Marshall Fire, hits FAIR plan policyholders, the program may not have enough to pay claims. In that case, private insurance companies would cover the shortfall — costs that could then be passed onto other policyholders. This is already expected to happen in California following the devastating LA fires.
Long-term, Conway hopes to stabilize the private market so the FAIR Plan becomes unnecessary.
“My ultimate goal is we don’t have a single home in the FAIR plan,” he said.
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