Not all home insurance in Colorado is the same, but chances are, if you have a policy, you’ll likely have an HO-3 policy. There are multiple protections afforded to homeowners that extend well beyond your home, but the bulk of your protection will come from your dwelling coverage.
As the most important component, it’s important for homeowners to understand what home insurance dwelling coverage is, how it protects your home, and some of the pitfalls that can arise if you aren’t careful.
After all, having a homeowners insurance policy doesn’t do much good if you aren’t protected adequately from the perils that may arise. Learn more about dwelling insurance coverage, and how to save on your protection without security in the process.
What Is Dwelling Coverage for Colorado Homeowners?
Dwelling coverage in Colorado is going to be the bulk of your coverage if you’re a homeowner in most cases. This is because while your home insurance policy may cover many different aspects of property, dwelling coverage is there for the structure of your home.
This means your home’s foundation, walls, interior, and many critical components are responsible for your home’s standing and operating as a structure. Think about your home insurance policy this way:
- While you gain protection against losses involving your home, there are multiple coverages involved with standard home insurance coverage.
- The majority of such policies, HO-3 policies, will be focused on protecting the structure of your home.
- Dwelling coverage, Coverage A, is going to be the most valuable part of most homeowners insurance policies.
- Without this coverage, you’d be responsible for restoring your home after a loss.
When homeowners think of coverage, whether intentionally or inadvertently, dwelling coverage is the main concern. It’s the core of your home insurance policy and is vital for anyone who owns a home.
Homeowners insurance dwelling coverage isn’t always mandatory. In Colorado, you don’t have to have home insurance by law, but it’s always a good idea and encouraged. Underinsurance continues to be an issue for many homeowners in the state, according to the Colorado Department of Insurance, and the outcomes are costly.
Furthermore, if you have a home that you’ve purchased through a mortgage, you’re virtually guaranteed to be required to maintain a home insurance policy as a term and condition of your loan.
How Much Dwelling Coverage Do I Need in Colorado?
Your dwelling coverage amount of protection should be enough to restore your home in the event you have a complete loss. Unfortunately, for many homeowners in Colorado, this can be a misunderstood concept and leave policyholders with gaps in coverage and expensive bills.
The biggest issue with dwelling coverage in Colorado is that you’ll need to keep a level of protection that is enough to rebuild your home completely, not a level of coverage based on what you paid for your home or its current value.
Inflation, even when at a normal rate, means that it costs more to build a home over time. This is true because of the rise in the cost of both goods and labor. Therefore, if you purchased a home five years ago, you can expect it to cost more for the same materials to restore your home today.
This can be a problem because if you only have enough dwelling coverage to restore your home based on an out-of-date future, you could be left paying for the rest of it out of your own pockets.
Other coverages within your home insurance policy will also base their limits on a percentage of how much dwelling coverage you have. This means that by not having enough protection under Coverage A, you could also have lower limits elsewhere.
Dwelling coverage home insurance will also need to have policy limits that meet the needs of your home in its current state. For example, if you’ve remodeled your home and upgraded to say marble counters or hardwood, you’ll need enough coverage to cover these upgrades.
80/20 Rule for Colorado Homeowners
If you are looking to purchase a lower amount of protection from your dwelling coverage, it’s never recommended. But should you choose to do so, you’ll want to be aware of the 80/20 rule beforehand.
The idea here is that if you don’t have at least 80% of your home’s replacement value covered by a policy, your insurance company is unlikely to pay the full amount of claims you submit after suffering a loss.
This means you’ll be responsible for the rest, even for smaller claims. Considering the risks involved and the inconveniences that not having enough coverage can bring, it’s better to have enough coverage to restore your home after a major loss, such as a wildfire, than to try to save money through lower levels of coverage.
The majority of homeowners in The Centennial State have a common trait: their homes are their largest financial investments. Should a devastating loss occur, this would not only be a major blow to shelter among other things, but a financial hit many are not prepared for.
Maintaining adequate coverage has more pros than cons and protecting your finances in the long run from the potential of major monetary downfalls following a loss. Working with an insurance agent can help you save on premiums for dwelling coverage in Colorado while also having enough protection.
How Much Dwelling Coverage Do I Need for a Condo in CO?
The amount of dwelling coverage condo insurance you’ll need will vary from unit to unit, but the idea remains the same as it would for a traditional home. While your coverage might be lower and your premiums less expensive, you’ll still want to cover your condo’s dwelling space with enough protection to rebuild after a major or total loss.
You’ll want to note that the 80/20 rule listed above also applies here, meaning that if you don’t have enough coverage, you may pay more out of pocket, even if you are dealing with a smaller loss.
This is another reason why working with a licensed professional agent can help you find the right level of coverage. Condos can range in their characteristics and need unique protections as well. Find the right coverage for your home, and cover your condo in the event of the worst-case scenario.
What Is Extended Dwelling Coverage in Colorado?
Insurance companies often offer a dwelling extension coverage endorsement to enhance homeowners’ policies. This allows homeowners in Colorado to rebuild their homes in the event a loss is so great that it reaches beyond their policy’s coverage limits.
Typically, this endorsement, or rider, is relatively inexpensive and can be under $100 per year for many. You’ll be protected in the event you suffer a major loss and haven’t either purchased enough dwelling coverage in the first place or haven’t been able to upgrade your current policy.
If you’re looking to avoid this altogether, then it’s a good idea to speak with your insurance carrier when you make upgrades to your home. It’s also important to review your coverage every 6 to 12 months as your coverage needs may change. You may also find that it’s time to switch carriers because you are overpaying for home insurance.
What Is Increased Dwelling Coverage for Colorado Homeowners?
Increased dwelling coverage is the same thing as extended dwelling coverage, only with a different name. No matter what you call it, if you’re looking for a rider that can provide an extra layer of affordable coverage, be sure to speak with your agent about your options.
How Much Should Dwelling Coverage Be in Colorado?
The amount you pay for dwelling coverage in Colorado will vary for many reasons and is never the same for two homeowners. Even in identical homes in the same neighborhood and similar features, there are still personal factors that can affect coverage.
Therefore, it’s less about finding a specific number and more about finding the coverage you need at the lowest price available. Average costs can help, but ultimately, you’re going to want to shop and compare coverages among many different insurance companies.
Once you identify the level of coverage you need, you’ll notice that each company will offer it at a different price. Basically, each company is looking at the amount of risk you’ll be as a client, but they all do so in a unique manner.
By comparing your coverage, you can cut through the noise and identify the cheapest coverage on the market that fits your home’s specific needs. At Freedom Insurance Group, it’s exactly how we help homeowners save 40% on average for their premiums.
We are proud to have partnered with many of the top-rated insurance companies in Colorado to prived our clients with a wider range of coverage options, bundles, discounts, and more. Save on dwelling coverage in Colorado by contacting us at the number above or by using our online tool for an accurate homeowners insurance quote.