Insurance companies are increasingly withdrawing coverage from homeowners, leaving residents blindsided and struggling with the rising costs and risks associated with living in areas prone to extreme weather events like wildfires.
Data from the National Interagency Fire Center reveals a concerning trend: the area affected by wildfires in the U.S. has seemed to increase since the 1980s, according to the U.S. Environmental Protection Agency. As the damage from wildfires becomes more prevalent due to human-induced extreme weather events, insurance companies are facing substantial financial losses from frequent payouts. This is forcing them to drop coverage, a situation currently impacting residents in Boulder, Colorado.
Several factors are driving insurance companies to withdraw coverage from Boulder residents. Some residents have had their coverage dropped because they live in high-wildfire-risk zones. Others have seen their premiums double, leading them to question the feasibility of remaining in the area. Additionally, some homeowners with high-value properties (over $1 million) are finding themselves outside the scope of insurance company policies.
Kristina Miller Olsen, a Boulder resident, falls into the category of high-value property owners. Her home is valued at $3.5 million, according to Zillow. When Nationwide dropped her coverage due to the property value, Olsen found new coverage with State Farm. However, her premium jumped from $4,510 to $11,947.
“The thought of losing my house to a wildfire without full insurance coverage worries me because we have a fair amount of retirement savings in our property valuation,” Olsen said, according to Boulder Reporting Lab.
Rising home insurance costs are affecting homeowners across the country, including in North Carolina, California, Florida, and Louisiana.
If climate data is any indication of what’s to come, rising global temperatures will only bring about more wildfires and other extreme weather events. The increased wildfire risk not only puts communities at risk, but also drives insurance companies to withdraw coverage from high-risk areas. The ethical implications of these decisions are also coming under scrutiny.
In response to these challenges, Colorado policymakers are working to protect homeowners and their properties. The proposed bill, HB 1182, will require insurers to consider wildfire mitigation efforts taken by homeowners to lower their premiums. Furthermore, the state is establishing the Fair Access to Insurance Requirements (FAIR) Plan to provide last-resort coverage, up to $750,000, for high-risk property owners. The cost will be shared among major insurers to ensure coverage for Colorado homeowners while acknowledging the burden on insurers.
