UPDATED: Mar 13, 2020
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Buying a home is an extremely complex and arduous process. But this uphill battle shouldn’t be a deterrent towards your home-owning aspirations. It’s important to make sure you learn everything you need to know about becoming a responsible home owner. And, for better or worse, purchasing a homeowner’s insurance policy is an important part of that process. Without homeowner’s insurance coverage, even the tiniest little accident can produce a heap of financial problems for you. But finding the right insurer and getting a comprehensive policy for a fair price can help alleviate many of the potential pitfalls that homeowners face.
In the state of Colorado, the most common type of homeowner’s insurance policy is referred to as an HO-3 policy. It protects your home, its contents, and the general structure. However, there may be policy exclusions depending on which company underwrites your policy, so make sure to go over your documents carefully with your insurance agent.
|Type of Coverage||Coverage Amount|
|Replacement Cost (Dwelling)||$200,000|
|Replacement Cost (Contents)||$160,000|
Typical coverage limits for an HO-3 policy in Colorado are listed in the table above. If you feel that you need more coverage for your property, liability, or want to expand your coverage options, you may need to discuss these particulars with your insurance carrier. In many states, basic homeowner’s insurance policies don’t include coverage for common natural disasters that could damage your home or property. They also may not include enough coverage for the true value of your home – either now, or potentially in the future.
Obviously, cities with higher property values tend to have higher insurance rates overall. But keep in mind that these are estimates for average quotes across the region as a hole. In a city like Aurora, for example, your required annual premium payment could be as low as $732 from a company like AIG, or as high as $2,792 from the Farmers Insurance Exchange. That’s over $2,000 difference between companies for insuring property within the same city. That’s why it’s so important to shop around; not only can you save thousands on your premiums yearly, but tens of thousands (if not more) over the life of your home.
Laws and Requirements
Homeowner’s Insurance is not legally required for home ownership in Colorado; however, there are major exceptions to this rule. If your home was paid for with a mortgage from a bank, for example, your lender has the legal right to require that you maintain a homeowner’s insurance policy. And, although not legally required, it is important to take a home inventory in order to purchase homeowners insurance from your chosen provider.
Taking a Home Inventory
Taking an honest and thorough inventory of your home and its contents is the keystone of getting the best value on your homeowner’s insurance coverage. You don’t want to over-estimate your property’s value and end up paying too much for coverage. But at the same time, it’s equally important – if not more important – to make sure you don’t underestimate your property’s value, either. Doing so could leave you with thousands of dollars in repair and/or replacement costs should your policy’s coverage limits fall short.
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Choosing What (and How Much) Coverage
The basic HO-3 policy that many Colorado home insurance companies offer is really only the tip of the iceberg. On top of your basic policy, there are many other different types of coverage you may want to consider. Some of them include protection against:
- Fires – fires, and wildfires especially, are a growing concern in the woodsy Colorado countryside. While even the most basic homeowner’s insurance policy provides for wildfire coverage, they may come inspect your property to make sure your house is as protected as can be from catching fire or spreading the blaze.
- Floods – flooding, and especially flash flooding, have become a problem for Colorado property owners in recent years. It would be wise to discuss flood coverage with your homeowner’s insurance agent before making a final decision on your policy
- Damage from Winter Storms – when you combine the northern latitude of the state with its high elevation, then property damage from snow, sleet, hail, and other cold weather events is of major concern.
- Covering Your Property – In truth, your home is the shell around which you keep all of your precious belongings. Things like clothes, artwork, electronic devices, and more need to be financially protected, too. This is another reason why taking an honest and thorough home inventory is so important to the insurance buying process. In Colorado, financial protection for your belongings is included in a typical HO-3 policy.
- Liability Coverage – this type of coverage is also included in Colorado homeowner’s insurance policies. Unfortunate incidents on your property can happen when you least expect them. And if you are somehow deemed at fault, you may be legally liable for medical, repair, or replacement costs to the injured party.
- Umbrella Coverage – if your basic homeowner’s policy doesn’t cover the full value of your home and property, you may have to purchase additional coverage called “umbrella coverage”. Purchasing this coverage will increase the limits on how much your insurance company will pay out in the event of damage. It will likely, however, end up raising your premiums as well.
Replacement Cost vs. Actual Cash Value
Your home inventory is a snapshot of your property’s current value. But it can’t predict what your property values will be several years from now – and disasters can strike at any time. Whether you purchase a policy based on the Actual Cash Value of your property or its Replacement Cost Value can make a big difference in how much you get paid in the event that you have to file a claim.
How Your Credit Score May Influence Your Rate
Calculating your credit score is a little bit different for homeowner’s insurance than it is for other types of financial coverage. This is because of all the different variables that go into calculating how much coverage you need versus how likely you are to file a claim. With car insurance, for example, your company will likely perform a “hard check” in order to determine your credit rating. This check goes on your credit report, and too many checks could lower your score. Auto insurance companies justify this sort of invasive check because most people usually don’t request very many quotes before purchasing a policy.
Homeowner’s insurance, on the other hand, works a bit differently. You need to get several different opinions on the true value of your home, your property, and how much it will cost to insure everything. So in order to prevent credit checks from giving consumers misleadingly low scores, homeowners insurance companies perform what is called a “soft check” or a CLUE report. This involves gathering information about you, your home, and your property in indirect ways that won’t hurt your credit history, but will help give your underwriter a more accurate picture of your potential risk.
For more information, feel free to click any of the links you see in this article. They all lead to more detailed information about homeowner’s insurance, specifics on purchasing a policy, and how to find the best deal. You should also contact local resources in your state, such as:
Or contact them directly through the following resources:
Colorado Department of Regulatory Agencies
Division of Real Estate
1560 Broadway, Suite 925
Denver, CO 80202
Phone: 303-894-2166 | Fax: 303-894-2683