2.1 Colorado Homeowners Insurance Requirements

Why Colorado Homeowner's Rules Are Tested Heavily

Colorado is one of the most hail-battered states in the country (the Front Range sits in "Hail Alley"), and the foothills and mountains carry severe wildfire exposure. The state-specific portion of the Property exam therefore drills the consumer-protection statutes that respond to these perils. Expect questions on notice periods, the FAIR Plan, deductible disclosure, and roof valuation.

Cancellation and Nonrenewal: C.R.S. 10-4-110.7

Colorado Revised Statutes section 10-4-110.7 governs cancellation and nonrenewal of homeowner's insurance. The current statute requires the insurer to mail a written notice, by first-class mail to the last address on file, at least 60 days before the effective date of cancellation or nonrenewal, and the notice must state the specific reasons.

Exam trap: Older study material (and the prior edition of this guide) cited 45 days. The current 10-4-110.7 figure is 60 days for cancellation or nonrenewal, and 10 days for nonpayment. If the answer choices include both 45 and 60, choose 60.

After a policy has been in force more than 60 days, the insurer may cancel only for enumerated grounds: nonpayment, fraud or material misrepresentation in obtaining the policy, a substantial change in the risk, or violation of policy terms. An insurer may not cancel or nonrenew solely because the insured filed claims, nor for any unfairly discriminatory reason.

The Colorado FAIR Plan

The FAIR Plan (Fair Access to Insurance Requirements) is the residual market that writes basic property coverage when the voluntary market will not. Colorado enacted a statutory FAIR Plan (the Fair Access to Insurance Requirements Association) specifically to respond to growing wildfire-driven nonrenewals.

What the FAIR Plan typically covers

When the FAIR Plan applies

• The property has been declined by the voluntary (admitted) market.
• The home sits in a high wildfire-risk zone (foothills, mountain, wildland-urban interface).
• It fails standard underwriting (older wiring, distance to fire hydrant/station, defensible-space deficiencies).

Key point: The FAIR Plan is a last resort, not a first option. It usually costs more and provides narrower coverage than a voluntary HO-3. Producers must document a diligent attempt in the admitted market first.

Hail, Wind, and Percentage Deductibles

Because hail is the dominant homeowner's loss in Colorado, insurers commonly attach percentage deductibles for wind/hail and require producers to disclose them clearly.

Worked example: A homeowner has Coverage A of $450,000 and a 1% wind/hail deductible. A hailstorm causes $14,000 in roof damage. The deductible is 1% of $450,000 = $4,500, so the insurer pays $9,500 (before any ACV depreciation). Many insureds wrongly assume their flat $1,000 deductible applies to hail.

Roof valuation: ACV vs. RCV

• Replacement cost (RCV): pays to replace the roof with new materials of like kind and quality, no depreciation deducted (recoverable depreciation may be held back until repairs are made).
• Actual cash value (ACV): replacement cost minus depreciation. Insurers increasingly schedule older roofs at ACV, which can cut a hail payout sharply on a 15-year-old roof.

Producer duty: Disclose whether the roof is settled at RCV or ACV and explain the percentage deductible. Cosmetic-damage exclusions (dents that do not impair function) are also common and must be disclosed.

Producers should also discuss defensible space and brush mitigation, which can reduce wildfire premiums or restore voluntary-market eligibility.

Recent Reforms and Producer Disclosure Duties

After the December 2021 Marshall Fire destroyed roughly 1,000 homes in Boulder County, Colorado found that many homeowners were severely underinsured — their dwelling limits did not reflect current rebuild costs. The legislature responded with reforms producers must understand.

Underinsurance and rebuild-cost rules

• Insurers must offer or describe extended replacement cost (a percentage cushion above Coverage A, often 20-50%) and guaranteed replacement cost options where available.
• After a declared disaster, insureds generally get additional time (extended periods are common) and broader additional living expense (ALE) allowances to rebuild.
• Carriers must use reasonable, current cost data when setting dwelling limits rather than stale replacement-cost calculators.

A producer's core homeowner's disclosures

Practical scenario: A foothills homeowner is nonrenewed by a national carrier citing wildfire exposure. The producer must (1) give the insured the 60-day notice, (2) attempt placement with other admitted carriers, and (3) only if those decline, place the risk through the FAIR Plan while disclosing its narrower coverage and the need for a separate liability policy.

Note that these consumer protections are concentrated on personal lines homeowner's policies; commercial property follows the rules in section 2.2.