Home insurance premiums rising
Rates affected mostly by claims for hail, wind damage
Many homeowners in Colorado have found that recent hailstorms, and not last summer's wildfires, are significantly increasing the cost of their home insurance premiums.
In a TARGET 13 investigation, insurance experts said premiums began rising in December and likely will continue to increase because a recent trend of hail storms, fires and other catastrophes is expected to continue.
"We're seeing 20 to 40 percent increases across the board, industry-wide," said Robert Medina, a Farmer's Insurance agent. "The cost of labor (and) materials is up also."
"If a home has a roof that's over 10 years old, we're seeing increases anywhere from 50 to 100 percent," said Robert Edgin, an agent for American National Insurance. "Because the insurance companies know that those roofs are one storm away from being replaced."
Three weeks before the Waldo Canyon fire destroyed 346 homes in Mountain Shadows and generated $352 million in damage claims, two hail storms on June 6 and 7 resulted in $321 million in claims statewide. And 2009 was the most expensive year for hail damage in state history, with more than $1 billion from three major storms.
Those catastrophes have placed Colorado among the top 10 U.S. states for catastrophic damage claims, said Carole Walker of the Rocky Mountain Insurance Information Association. She said around half of claims in the state are due to catastrophes, mostly caused by hail and wind.
"Insurance companies are losing money on homeowner's insurance," said Walker. "They're paying about $1.37 in claims for every dollar they receive in premiums. At some point, that has to adjust."
Because insurance carriers base premium rates on past risk instead of future risk, Walker said last summer's fires won't be included for several years yet -- meaning the possibility of even higher premiums.
Edgin said the average annual homeowner's insurance premium in Colorado is around $1,200. That's up from $926 in 2010. Colorado is above the national average in that regard.
Walker said the insurance industry remains competitive and strong in Colorado with more than 200 carriers, but that could change if premium rates continue increasing.
"We've seen what happened in Florida and Texas," she said. "Insurance companies simply couldn't afford to stay in the market for what they were able to charge for insurance. "
Edgin said he knows of one carrier that already has left Colorado because of the trend.
Jim Riesberg, the state's insurance commissioner, said he's not worried about customers or carriers being priced out of the market yet.
"The homeowner's rates have not been overly high, based on the risk that's out there," he said."
Furthermore, homeowners who live in or near Mountain Shadows are trying to afford premium increases while spending several hundred dollars additionally to obtain separate flood insurance from the government. The area is at an increased risk for flash flooding because of the fire.
However, experts say homeowners can take steps to ease the financial blow.
"Talk with your insurance agent," said Medina. "Make sure you have the best coverage and get all the discounts you qualify for. You can shop around. Some people do that online hoping for a better deal. A better deal doesn't mean you have a better policy or better coverage."
Edgin advises homeowners to have a Class 4 roof on their homes to provide the greatest protection from hail. He said the upgraded roof may cost an additional $500 to $1,500.
"That's why insurance companies are loving them and giving very good discounts to clients who put them on," Edgin said. "Those roofs can save you up to $2,500 over five years, plus no roof claims for a while."
Walker said homeowners also can save money if they take measures to create defensible space around their homes to prevent wildfire damage.
"I you don't take proven preventive measures, you may find it harder to afford insurance or even find someone who will cover you," she said.
Experts say taking a higher deduction is another option.
Edgin said preventive measures will be important in areas like Black Forest and Woodland Park where the fire risk remains especially high.
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