One month later, what homeowners, officials are saying about Colorado's new 'last-resort' insurance

MORRISON, Colo. — Last month, Colorado launched a new "last-resort" insurance plan to help homeowners who struggled to find insurance elsewhere. Denver7 is following up with the state to see how the first month has gone for the Colorado FAIR Plan.

The FAIR Plan provides basic insurance and is considered a safety net for residents at extreme risk of natural disasters. Kelly Campbell, executive director of the program, said the program has gone as well as anticipated.

"A lot of people are interacting with the FAIR Plan. A lot of agents are going in, getting information," Campbell said. "It's been busy. Launching a FAIR plan, first time in a generation across the country, so that's been its own unique project."

The FAIR Plan was created by Colorado legislation passed in 2023, and the state began accepting applications in April. Campbell said it provides "actual cash value" policies, which is not the value to replace or rebuild the property.

"One of the first questions about the FAIR Plan is, how much does it cost? So, agents are able to go in, get quotes, get a sense of how much it costs. But because the FAIR Plan is very basic coverage, it may not be the best fit for all consumers," Campbell explained. "We are basic property coverage. So, we do not provide the same kind of coverage that your standard homeowners insurance policy covers. We do not provide replacement cost. We do not provide coverage for liability, water damage, theft. Those are all the types of things that are under your standard homeowners insurance policy."

Campbell said the vast majority of states already have a FAIR Plan or a market of last resort insurance options.

"We've all felt, in the last couple of years, a difference in the homeowners insurance market," said Campbell. "We've seen increased cost. Some people are having more difficulty securing coverage."

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One of those individuals experiencing a difficult time with their home insurance is Sara Henry. Her Morrison property was previously insured by State Farm. She considered selling the home, but after learning expensive septic system improvements were needed, she decided to place the property back into the rental market.

"All of a sudden, I get this panicked phone call from my agent saying, 'Don't put it back into the rental pool. That's going to trigger cancellation.' I'm like, 'Cancellation? For what reason?'" Henry recalled. "Then I started hearing from everyone that all these companies were pulling out of the area, and all it took was the smallest little change in your policy, and that was a reason for them to cancel. And so they canceled it."

Her policy was canceled at the time of renewal: the beginning of April. Henry said she had roughly six months to find new insurance.

"I called every kind of main carrier you can think of. Every single one said 10 out of 10 fire danger, no, we're not insuring," Henry said. "I talked to my mortgage company multiple times. They said we're going to have to do force-placed insurance, which is four or five times as expensive and only covers the mortgage, doesn't cover me or my equity at all. It doesn't cover liability. So, that's what is currently in place."

That's when Henry contacted EJC Insurance and was connected with a specialist, Kaysia Sutz. The two believed the timing of the Colorado FAIR Plan launch would be the solution to their predicament.

"The Colorado FAIR Plan really was her last resort," Sutz said.

The process of trying to secure a plan with the FAIR Plan was "bumpy," according to Sutz.

"They are still trying to figure out some things and figure out what's working, what's not working. So, it's been a little bit of a rocky road," said Sutz. "They just launched, right? And so, it's a new baby for them."

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In order to be eligible for the FAIR Plan, Campbell said an individual must have been declined from the admitted market three times. In addition, a homeowner must work with a licensed insurance producer to apply for the plan. Campbell said Henry met those requirements.

According to Sutz, the Morrison property would need to be insured at roughly $400,000 to rebuild the home. She said she requested that amount and instead was offered approximately $200,000 from the FAIR Plan.

"Where are we getting this $211,000 from? You know, it doesn't cover much. It doesn't hardly cover a townhouse nowadays, right? But that is the main difference between an actual cash value policy and a replacement cost value policy," Sutz said. "Not a good fit for Sara, unfortunately, because it's actual cash value and she needs a full policy that is full replacement on her home... Insurance is to make you whole. And so, replacement cost does that. Actual cash value does not do that for families."

Ultimately, Sutz was able to find Henry insurance through a non-standard provider. Still, Campbell said the FAIR Plan has been a good fit for some other homeowners who have applied.

"It's a learning curve regarding the Colorado FAIR Plan," Campbell said. "At the Colorado FAIR Plan, we are taking feedback that we get from agents and consumers, and we're constantly looking at our processes to make sure that we have a process that's intuitive and easy to understand and can really help agents get the information that they need to work with their customers."

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