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Homeowners in Hail-Prone Colo. Now Face Higher Deductibles

October 18, 2016

Insurance carriers over the past few years have been forced to raise premiums for homeowner’s insurance in Colorado in response to a seemingly unrelenting stream of hailstorms, floods and wildfires. Going even further, some carriers are now changing their deductible formulas.

homeowners deductibles
CCIG’s Lynn Paricio.

These insurers are imposing deductibles based on a percentage of a home’s value rather than a set deductible.

The trend hasn’t spread to every carrier but some of the biggest names in the insurance business are shifting in this direction, typically asking policyholders to pay up to 1 percent of the dwelling limit on their home to offset repair expenses. Other carriers are expected to eventually follow suit.

For a home that would cost $1 million to rebuild, that can mean a $10,000 deductible – a big difference from, say, the $2,000 deductible many homeowners are accustomed to seeing. In fact, the average annual home insurance premium in the U.S. is even lower, about $1,200 a year.

RELATED: 6 Ways to Save on Homeowner’s Insurance

Rate hikes have been reported all across the country but Colorado homeowners have been among the hardest hit, thanks to year after year of record-breaking hailstorms and catastrophic fires.

According to the Insurance Research Council, Colorado last year was one of the top six states in the U.S. for highest 5-year average annual insurance claim per home. Worse yet, the state was second only to tornado-struck Oklahoma for catastrophic claims.

From 1997 to 2013, claims per home have increased 179 percent in Colorado, with most of that increase happening from 2009-2013.

It’s no wonder some homeowners have seen their rates double. Others have had trouble getting their policies renewed and have had to find insurance through another carrier.

Premium increases became truly noticeable after the 2012 Waldo Canyon wildfire in Colorado Springs and severe hailstorms across the state. Homeowners’ claims hit a record that year, averaging $936, according to data provided by the Rocky Mountain Insurance Information Association. The average had been $273 a decade earlier.

Colorado’s Front Range is located in the heart of “Hail Alley,” which receives the highest frequency of large hail in North America, so residents usually can count on three or four “catastrophic” (defined as at least $25 million in insured damage) hailstorms every year. In the last 10 years, hailstorms have caused more than $3 billion in insured damage in Colorado.

Weather and wildfire aside, Colorado’s swelling population and the growing number of high-end homes damaged in storms has contributed to rising rates.

RELATED: Wildfire Coverage that Puts Fire Crews at Your Doorstep

To determine your home insurance price, carriers look at more than weather patterns and claims history. Their criteria incude:

  • Rebuilding cost of your home.
  • Age of your home.
  • Distance between your home and the nearest water source.
  • Fire protection rating of your city.
  • Your coverages, limits and deductible.

Homeowners, naturally, aren’t happy when their rates go higher or when they find themselves footing a bigger share of the repair bill because of higher deductibles.

It’s not an ideal solution but you can decide to pay even more in premiums in exchange for a lower deductible. Many carriers have separate deductibles for various types of damage, so be sure to ask about whether your policy allows higher deductibles for hail or other natural disasters.

Lynn Paricio is an Account Executive at CCIG. Reach her at LynnP@thinkccig.com or 720-212-2060.

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