Everything You Need to Know About Homeowner’s Insurance

If you own your own home, homeowner’s insurance is an essential financial instrument to possess. If you have a mortgage on your home, chances are your bank or other mortgage servicer requires you to maintain a homeowner’s insurance policy on your house. Homeowner’s insurance protects you from damage or loss of the home due to fire or other disasters. It also protects your personal property inside the home up to the limit of your specific policy. If the home you own in Colorado is a condominium, you would purchase a Condominium Owners Insurance Policy instead of a homeowner’s insurance policy. If you consider buying a new home, research how much homeowner’s insurance on that home will cost when determining your ability to afford that home. Homeowner’s insurance is an essential part of any homeowner’s financial strategy and there are many different policy types and competing homeowner’s insurance providers. Below is a helpful guide to homeowner’s insurance in Colorado, including the different types available, how to compare policies and how to purchase homeowner’s insurance on your home.

What is Colorado Homeowner’s Insurance?

Homeowner’s insurance in Colorado is managed by the Colorado Department of Regulatory Agencies’ Division of Insurance. Colorado homeowner’s insurance policies in Colorado, known as HO-3 policies, are intended to cover every aspect of your home from the structure to its contents. Some policies do have exclusions to be aware of before you purchase them. However, insurers are required by law to explicitly and completely detail everything that is and is not covered by the respective policy, and to communicate the policy’s specific liability limits.

What Does Homeowner’s Insurance in Colorado Cover?

Most Colorado homeowner’s insurance policies cover damage and loss due to falling objects, wind or wind driven rain and a structure’s collapse from hail or other debris. Policies in Colorado also typically cover damage from wildfires, including smoke and fire damage to the structure and its contents or damage caused by fire retardant drops, expenses for temporarily staying elsewhere should the homeowner be forced to evacuate and the total loss of a property or structure due to wildfire. Most homeowner’s insurance policies in Colorado do not, however, cover interior water damage if the walls or roof remain undamaged, fallen tree removal if the trees do not strike and harm the home, spoilage of food caused by a power outage, drain and sewer backup or flood damage. Homeowner’s insurance policies in Colorado also typically cover liability from the policy holder’s own drone crashing into another person or home, but do not typically cover landslides, sinkholes, mudslides, earthquakes, nuclear accidents or war. Residents should read the homeowner’s insurance policy closely, including its Declaration Page, Insuring Agreement, Exclusion Section and General Conditions, to be clear on its covered situations and coverage limits.

Replacement Cost Versus Actual Value

There are two basic types of homeowner’s insurance coverage that cover the structure and its contents. Some policies cover these items for their replacement cost, which pays the actual cost to replace the respective items. Other policies cover these items for their actual cash value, which pays exclusively for the value of the property at the time when it was destroyed or damaged. In both cases, the policy holder’s deductible is subtracted from the covered amount. Typically, the premiums for replacement cost policies are higher because the payouts on claims tend to be higher. Expensive valuables, such as furs, firearms and jewelry, may only be covered up to a limit that is less than their actual or replacement values. For these items, homeowners may want to purchase additional individual insurance or make certain their homeowner’s insurance policies endorse these items.

How to Compare Homeowner’s Insurance in Colorado

In 2016, the Colorado Department of Regulatory Agencies released a Homeowner’s Insurance Premiums Report that provided comparison data on premiums that Colorado insurers offer. For HO-3 policies, the dwelling replacement limit is $200,000, the contents replacement limit is $160,000, the personal liability limit is $100,000, the medical expenses limit is $1,000 and the deductible is $500. Be aware that replacement cost coverages in Colorado’s HO-3 policies does not make any deductions for depreciation and settles losses based on the total repair or replacement costs minus any applicable deductibles and subject to the limits of the policies.

How to Save on Homeowner’s Insurance

As you search for the right homeowner’s insurance policy for you, shop around because all policies and insurers are different. Find out if you can get any discounts for making your home more resistant to catastrophes or upgrading your home’s security to better prevent theft. Discounts on homeowner’s insurance may also be available if you are retied or over 55 years of age. You may also be able to receive discounted group coverage through your employer or a professional organization to which you belong. Remember not to confuse rebuilding, replacement costs or current actual value with the cost you originally paid for the home. You may want to consider a higher deductible and bundling your auto insurance with other policies held by the same insurer to lower your premiums. You can also keep your premiums lower by maintaining a decent credit score.