How fire and hail affect home insurance

As fire and hail damage continue to drive up home insurance rates in Colorado, about 90% of potential home buyers in the West consider at least one climate risk factor when buying a home.

At the end of September, Zillow has incorporated climate risk data from the First Street Foundation, a nonprofit organization that assesses climate risk, in listings of properties for sale in the US

This new feature provides home buyers with information on five key risks: flood, fire, wind, heat and air quality. Listings now include risk scores, interactive maps and information about insurance requirements.

“Climate risks are now a critical factor in home buying decisions,” said Skylar Olsen, chief economist at Zillow. “Healthy markets are those where buyers and sellers have access to all the data relevant to their decisions. As concerns about floods, extreme temperatures and wildfires grow – and what that could mean for future insurance costs – this tool also helps agents inform their clients in discussions about climate risk, insurance and affordability in the long term.

Growing risk

A Zillow analysis in August found that more new home listings nationwide show 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 had a significant fire risk.

Increase in premiums

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

According to Insurify research, Colorado has the second highest level of hail damageto USD 151 million annually. The state also has more than 321,000 homes at risk of fire, with reconstruction estimated at $141 billion.

Frequent and severe hailstorms and increased fire risks increases home insurance premiums in Colorado. At $4,186, the state’s average premium is among the highest nationally.

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

Chase Gardner, manager of Insurify Data Insights, said insurance companies are struggling as claims from natural disasters outpace premium increases. This has led some states, such as Florida, to create state 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 cover individuals and businesses in areas prone to natural or other disasters risks that cannot get traditional insurance.

To qualify for the FAIR Plan, homeowners must receive multiple denial letters from insurers and take steps to reduce fire risk. FAIR Plan policies typically offer 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 lower 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 will give you a lower rate,” Gardner said. “It’s always good to check around.”