URGENT UPDATE: A shocking new study reveals that 74% of homeowners affected by the devastating Marshall Fire in Colorado are underinsured, risking their ability to rebuild after a total loss. This alarming finding highlights a critical issue for homeowners across the state — and the nation — as insurance premiums soar.
The research, conducted by economists from the University of Colorado Boulder, examined 3,089 policies from major insurers held by those impacted by the Marshall Fire, which destroyed over 1,000 homes in suburban Boulder County. The study found that a staggering 36% of these homeowners carried policies that would cover less than 75% of the actual rebuilding costs.
As Colorado grapples with rising wildfire risks and increased construction costs, insurance premiums have surged nearly 60% over the past five years. This trend reflects a national shift in how insurers assess risk, leaving many families vulnerable in the face of disaster.
Residents may not realize their coverage is inadequate until it’s too late. The study utilized construction-cost software and adjusted estimates based on real-world quotes post-fire, revealing that even affluent households, earning over $180,000, face significant underinsurance risks.
Despite 87% of policies studied including extended replacement cost coverage — designed to protect against rising costs — the majority still fell short. This indicates that homeowners are often misled by the initial premium costs rather than the actual coverage provided.
The implications are dire. The research indicates that if all underinsured homeowners had adequate coverage, 25.4% would have filed for reconstruction permits within a year, compared to only 18.8% who did. This underinsurance crisis forces families to make heart-wrenching decisions, with nearly 9.7% of homeowners selling their destroyed properties instead of rebuilding.
In light of these findings, experts urge Colorado homeowners to take immediate action to protect themselves. Here are key steps to ensure adequate coverage:
1. **Request Detailed Comparisons:** When shopping for insurance or renewing, ask for a side-by-side comparison of coverage limits across insurers to avoid underinsurance in pursuit of lower premiums.
2. **Reassess Coverage Regularly:** After renovations or significant economic changes, review your coverage limits annually, especially in light of rising construction costs.
3. **Consider Insurer Reputation:** Choose companies with a strong local presence, as they are less likely to offer inadequate coverage due to community reputation concerns.
With wildfire seasons intensifying, Colorado families must act as if a total loss could occur tomorrow. The financial security of homeowners hangs in the balance, and immediate action is essential to ensure adequate insurance coverage.
This critical study, led by Professors Tony Cookson and Emily Gallagher, underscores the urgent need for homeowners to reassess their insurance policies now. For anyone affected by the Marshall Fire, the time to act is today — before disaster strikes again.
