Colorado is launching its new FAIR Plan homeowners insurance program on Thursday, providing a last-resort option for homeowners who have been declined coverage by at least three commercial insurance companies. The program comes as the state faces potentially severe hailstorms and wildfires this summer.
The FAIR Plan will offer coverage of up to $750,000 toward the cost of replacing a home, with optional coverage for wind and hail damage, theft, and vandalism. However, it will not cover water or flood damage, liability, content replacement, or additional living expenses if a homeowner is displaced by a fire.
“This product is not intended to compete with the admitted market,” said Kelly Campbell, the FAIR Plan’s executive director. “It’s not intended to be the same as a basic homeowners policy.”
Program Details
FAIR Plan policies will be sold through licensed agents, although a list of these agents was not available as of Wednesday evening. Homeowners can contact their insurance agent to determine if they are licensed to sell FAIR Plan policies. More information is available at coloradofairplan.com.
The Colorado legislature approved the Fair Access to Insurance Requirements Plan in 2023 in response to a growing property insurance crisis driven by climate change. More severe wildfires and hailstorms are increasing rates for homeowners, leading some insurance companies to withdraw from the market. The 2021 Marshall fire, which burned over $2 billion worth of homes and commercial buildings in Boulder County, intensified the problem.
Colorado is the 38th state to create an insurance safety net for homeowners. The first such program was established in California in the late 1960s, and they have since spread to help people find insurance in areas prone to natural disasters. However, as catastrophes become more severe, these plans are facing challenges.
Financial Structure
To establish the FAIR Plan, insurance companies operating in Colorado, including Nationwide, Progressive, and Liberty Mutual, have been charged a total of $51.5 million. This amount is approximately 1% of the $5 billion collected annually through homeowner policy premiums in Colorado. Insurance companies are expected to raise property insurance rates across the board to recoup this expense.
Rates for the FAIR Plan will vary based on the location of the home and associated risks. For example, the basic annual premium for a 2,288-square-foot home in Evergreen would be $4,361, with an additional $1,151 for wind and hail damage coverage, and $33.62 for vandalism coverage, totaling $5,547. In contrast, a similar home in Denver would have a basic premium of $190.66, with $3,476 for hail and wind protection, and $25.50 for vandalism, totaling $3,693.
Campbell advised homeowners to be cautious when comparing FAIR Plan costs to their current policies, as the FAIR Plan provides only the bare minimum coverage. Those using the FAIR Plan can inquire about additional policies for more comprehensive coverage, such as liability.
The image shows Christmas lights on a house as the Marshall fire rages in the background in Louisville, Colorado, on Dec. 30, 2021. (Credit: Helen H. Richardson, The Denver Post)
Campbell expressed uncertainty about the demand for the FAIR Plan, stating, “I hope tomorrow is my most boring day on the job. I hope people get better coverage on the admitted market with well-known carriers and they don’t need to come to the FAIR Plan.”
