Colorado Homeowners Insurance Laws
- Although Colorado doesn't mandate homeowner's insurance coverage, mortgage companies may require homebuyers to purchase a policy to help protect the bank's equity in the home. Because of this, requirements for coverage may vary widely from lender to lender. There is no ceiling set on the amount of coverage a lender can require a homeowner to carry on his home as a requirement for securing a loan.
Actual Cash Value Policies
- Because Colorado doesn't have a minimum coverage limit set for homeowner's policies, some homeowners opt to insure their property with an actual cash value policy. These policies essentially insure the home for the amount for which they were purchased, minus the value of the land it was built upon. Because this coverage is limited, and doesn't fluctuate with market conditions, ACV policies are cheaper than other types of coverage. With some areas of Colorado featuring rapidly appreciating home values, a loss of a home with an ACV policy may leave a homeowner with a settlement that is insufficient to purchase a similar home.
Replacement Value Properties
- Homeowners in Colorado who want to insure their home against the state's escalating housing costs as well as a catastrophic loss to their home may opt for a replacement value policy. These policies are more expensive than ACV policies, but cover payments to replace a home regardless of how much its value appreciated since it was purchased. Thus, a home purchased for $200,000 in 1992 may sell for $350,000 in modern markets; if it is destroyed; insurance providers provide a settlement for the value of the home at the time of its loss, not at the time of its purchase.
Personal Property Protection
- More than the cost of your home is covered in a homeowner's insurance policy. The value of all your personal property inside it is also covered by policies. In Colorado, this means that insurance companies must provide coverage, either actual cash value or replacement value, of personal property lost in a catastrophe.