How wildfires and hail affect home insurance

As wildfires and hail damage continue to increase home insurance rates in Colorado, approximately 90% of potential home buyers in the West When purchasing a home, take at least one climate risk factor into account.

At the end of September, Zillow processed climate risk data from First Street Foundation, a nonprofit organization that assesses climate risks, to homes for sale in the US

This new feature gives home buyers insight into five key risks: floods, wildfires, wind, heat and air quality. The lists now include risk scores, interactive maps and information about insurance requirements.

“Climate risk is now a critical factor in home buying decisions,” said Skylar Olsen, chief economist at Zillow. “Healthy markets are markets where buyers and sellers have access to all relevant data for their decisions. As concerns about flooding, extreme temperatures and bushfires increase – and what that could mean for future insurance costs – this tool also helps brokers educate their clients when discussing climate risk, insurance and long-term affordability.”

Increasing risk

An August Zillow analysis found that more new homes nationally exhibit significant climate risk compared to those listed five years ago. This trend applies to all five climate risk categories.

For example, about 17% of new listings in August showed significant wildfire risk.

Rising premiums

Climate-related weather damage is driving up insurance rates in the US According to an analysis by Insurify, a digital insurance agent that provides real-time quotes from more than 100 insurers, homeowners in 15 statesincluding Colorado, can expect continued weather-related rate increases and decreasing competition from insurance companies.

According to research by Insurify Colorado has the second highest property damage after hailfor $151 million per year. The state also has more than 321,000 homes at risk of wildfires, with reconstruction estimated at $141 billion.

Frequent and heavy hailstorms and increasing risks of wildfires increase home insurance premiums in Colorado. At $4,186, the state’s average premium is among the highest nationally.

By 2022, 76% of insurers in high-risk areas have scaled back, resulting in higher premiums and fewer options.

Chase Gardner, data insights manager at Insurify, says insurance companies are struggling as natural disaster claims exceed premium increases. That has led some states, such as Florida, to establish state-run insurance programs for high-risk homeowners.

State lawmakers passed the Colorado Fair Access to Insurance Requirements (FAIR) Plan in 2023. This property insurance program is expected to launch in 2025 and will cover individuals and businesses in areas prone to natural disasters or other risks for which traditional insurance is not available.

To qualify for the FAIR Plan, homeowners must receive multiple denial letters from insurers and take steps to reduce wildfire risk. FAIR Plan policies typically provide less coverage at a higher cost and are designed as a last resort until people find alternative coverage.

Get the best deal

Gardner said homeowners can take steps to reduce their insurance costs. He recommends shopping around and comparing policies to get the best price.

“Different companies calculate risk differently, so you might find one that gives you a lower rate,” Gardner said. “It’s always good to take a look around.”