Key Takeaways
- Colorado FAIR Plan provides basic property coverage for high-risk properties unable to obtain coverage in the voluntary market
- Colorado requires insurers to provide 45 days notice for cancellation of homeowners policies (except for non-payment)
- Hail disclosure is particularly important in Colorado due to the high frequency of hail claims
- Colorado requires specific disclosures about replacement cost vs. actual cash value coverage
- Insurers must clearly disclose deductibles, especially percentage-based hail and wind deductibles
Colorado Homeowners Insurance Requirements
Colorado has specific property insurance regulations that protect consumers and address unique risks like hail damage.
Colorado FAIR Plan
The Colorado FAIR Plan (Fair Access to Insurance Requirements) provides basic property insurance for high-risk properties:
What FAIR Plan Covers
| Coverage | Included |
|---|---|
| Fire and Lightning | Yes |
| Internal Explosion | Yes |
| Smoke Damage | Yes |
| Vandalism | Optional |
| Windstorm/Hail | Optional |
| Liability | No (separate policy needed) |
When FAIR Plan Is Used
- Property located in high-risk wildfire areas
- Property has been declined by voluntary market insurers
- Property doesn't meet standard underwriting guidelines
- Mountain properties with brush/fire exposure
Important: FAIR Plan is a last resort, not a first choice. It typically costs more and provides less coverage than voluntary market policies.
Hail Disclosure Requirements
Colorado has significant hail exposure, making hail disclosure particularly important:
Required Disclosures
Insurers must clearly disclose:
- Whether hail damage is covered
- Type of deductible (flat dollar vs. percentage)
- Percentage deductibles (often 1-2% of dwelling coverage)
- Cosmetic damage limitations
- Roof coverage terms (ACV vs. replacement cost)
Percentage-Based Deductibles
| Deductible Type | How It Works |
|---|---|
| Flat Dollar | Fixed amount (e.g., $1,000) |
| Percentage | % of dwelling coverage (e.g., 1% of $400,000 = $4,000) |
Exam Tip: Colorado producers must ensure clients understand percentage-based hail deductibles, which are common and can be significant.
Cancellation and Non-Renewal Requirements
Colorado has specific requirements for canceling or non-renewing property insurance:
Cancellation Notice Requirements
| Reason for Cancellation | Notice Required |
|---|---|
| Non-payment of premium | 10 days |
| Other reasons | 45 days |
| Within first 60 days | 10-45 days depending on reason |
Non-Renewal Notice Requirements
| Timeframe | Requirement |
|---|---|
| Standard Non-Renewal | 45 days before expiration |
| Reason Required | Must state reason upon request |
Cancellation Restrictions
- Cannot cancel solely due to filing claims
- Cannot cancel for discriminatory reasons
- Must follow proper notice procedures
- Refund of unearned premium required
Replacement Cost vs. Actual Cash Value
Colorado requires clear disclosure of coverage valuation:
Replacement Cost (RC)
- Pays cost to replace damaged property with similar new property
- No deduction for depreciation
- Most common for homeowners policies
Actual Cash Value (ACV)
- Pays replacement cost minus depreciation
- Results in lower claim payments
- May apply to certain items (older roofs)
- Must be clearly disclosed
Wildfire Coverage
Colorado has significant wildfire exposure:
Wildfire Considerations
- Mountain and foothill properties at higher risk
- May require FAIR Plan if voluntary market unavailable
- Brush clearing and defensible space may reduce premiums
- Evacuation coverage may be available
How many days notice must a Colorado insurer provide for non-renewal of a homeowners policy?
What type of hail deductible is based on a percentage of the dwelling coverage amount?