Wildfire season in Colorado is unpredictable and devastating—especially for homeowners on the Western Slope. If you assume your home insurance will fully cover you in the event of a fire, you might be in for a costly surprise. Many homeowners only realize they don’t have enough protection after disaster strikes.

Before the dry, hot summer kicks in, take the time to review your policy, understand your coverage, and request necessary changes. A little effort now could save you from financial ruin later.

You Probably Don’t Have Enough Coverage — Here’s Why

Imagine losing your home to a wildfire, only to find out your insurance will only cover a fraction of the rebuilding cost. Unfortunately, this is the reality for many homeowners in Colorado. A study of the 2021 Marshall Fire found that 74% of affected homeowners were underinsured, and 36% were severely underinsured, meaning their coverage was less than 75% of their home's actual replacement cost.

Underinsurance is more common than you think: Most homeowners don’t review their insurance policies regularly, leaving them vulnerable to coverage gaps. Your policy might be outdated, and with soaring construction costs, it may no longer cover the full cost to rebuild your home.

Inflation & construction costs are skyrocketing: The cost of materials and labor has outpaced insurance adjustments, leaving many homeowners with policies that won’t meet today’s rebuilding costs.

• The Colorado Construction Cost Index reported a 68.5% increase in construction costs in just one year (Colorado DOT, 2022).

• The average hourly wage in Colorado’s construction industry rose 10% year over year, marking the largest increase since 2008 (ThinkCCIG, 2023).

Would your current insurance policy cover the cost of rebuilding at today’s prices? If you’re not sure, it’s time to check.

What To Look For When You Review Your Home Insurance

Reviewing your home insurance policy might not be the most exciting task, but it’s one of the most important things you can do to protect yourself. Especially if you live in an area prone to wildfires. Taking a little time now to go over your coverage can save you a lot of stress and financial hardship later.

• Dwelling Coverage: Does your policy cover the full replacement cost of your home? Many policies only cover the market value, which is often far less than what it would take to rebuild. Rebuilding expenses can often surpass market valuations, leaving you financially vulnerable.

• Personal Property Coverage: If you had to replace everything today, would your policy cover the cost? Take inventory of your belongings—furniture, electronics, clothing, valuables—and ensure they’re properly covered.  If your home burned down would you be able to remember everything you had?  A good way to prepare yourself is to spend an hour or two going through every room, cupboard, and drawer in your house while making a video with your phone.  Yes, it will take the better part of a morning–but you will sure be glad you had that video if your home is destroyed and your insurer asks you for an inventory of every item damaged in your home.

• Loss of Use (Additional Living Expenses - ALE): If your home is destroyed, your ALE coverage helps pay for temporary housing, meals, and other essentials while your home is being rebuilt. Given the rising cost of rentals and hotels, check if your ALE limits are enough to cover you for at least 24 months.

• Wildfire-Specific Exclusions: Some insurers exclude wildfires or impose higher deductibles for wildfire claims, especially in high-risk areas. Call your insurance company to confirm wildfire protection is included.

• Deductibles & Out-of-Pocket Costs: How much will you need to pay out-of-pocket before insurance kicks in? A higher deductible lowers your monthly premium but could cost you more when you need to file a claim.

Advocating for Yourself: How to Get the Coverage You Need

When it comes to home insurance, you can’t just assume your provider has you fully covered. You have to ask the right questions and advocate for yourself. Insurance companies don’t always update policies to reflect rising construction costs or changes in risk levels, so it’s up to you to make sure your coverage is keeping up.

1. Call Your Insurance Company – Don’t wait until disaster strikes. Contact your provider now to discuss your policy.

2. Ask for a Policy Review – Request a detailed review of your coverage, including replacement costs and exclusions.

3. Negotiate Better Terms – If your coverage is insufficient, ask for a higher limit or additional endorsements.  If the limits offered by your insurer seem too low, you can have a contractor weigh in on what it would actually cost to rebuild your home.

4. Shop Around – If your current insurer won’t provide adequate coverage, consider switching companies.

5. Document Everything – Keep records of all communications with your insurer, including policy updates and premium changes.

Here’s What You Should Ask Your Insurance Company

• Request a replacement cost estimate: “Can you verify that my policy covers the current cost to rebuild my home?”

• Increase your coverage limits: “If my home was a total loss today, would my policy fully cover the rebuilding costs?”

• Consider extended or guaranteed replacement cost coverage: “Does my policy include extra coverage if rebuilding costs exceed my policy limits?” Colorado law requires insurers to offer extended replacement cost coverage of at least 50% of the dwelling limit (HB23-1174).  Be sure to accept this increased coverage.

• Upgrade to a comprehensive policy: “Does my policy cover code upgrades, debris removal, and smoke damage?”

Final Thoughts

Prepping for fire season goes beyond clearing brush and securing your home. It starts with making sure your insurance policy will protect you when you need it most. By reviewing your policy, advocating for better coverage, and taking proactive steps to protect your home, you can minimize financial risk and stress in the event of a wildfire. If you're unsure about your coverage or need legal assistance with an insurance claim, contact Western Slope Law. We can help you navigate the fine print and ensure your rights are protected.

More on Colorado Fire Insurance Law

1. How do I know if I have enough insurance coverage for a wildfire?

Check your dwelling coverage amount against current rebuilding costs in your area. You may need to increase your limits or add extended replacement coverage.  You can also check with a local contractor to see if your insurance limits are in line with the likely cost to rebuild your home in the event of a total loss.

2. What is the difference between replacement cost and actual cash value coverage?

Replacement cost coverage pays to rebuild your home at today’s prices, while actual cash value only covers the depreciated value of your home and belongings.  Replacement cost coverage is far better than actual cash value coverage.

3. Does homeowners insurance cover smoke damage from wildfires?

Most policies cover smoke damage, but some may have exclusions. Check your policy details to confirm.

4. What if my insurance company denies my wildfire claim?

You should seek legal assistance as soon as possible.   You can also file a complaint with the Colorado Division of Insurance.

5. Are wildfires considered a covered peril under standard homeowners insurance?

Yes, in most cases, wildfires are covered, but some insurers may impose special restrictions or deductibles. Always verify with your insurance carrier. By taking the time to review your insurance policy now, you can avoid unpleasant surprises and ensure your home is fully protected this wildfire season.