Colorado Homeowners: 80 20 Rule Home Insurance Explained


The insurance industry is filled with terms and jargon that may hold significance but can be hard to follow at times. Such is the case with the 80 20 rule home insurance in Colorado continues to display.

However, the homeowner insurance 80 rule is important. Furthermore, there are more considerations surrounding it. This is because the rule deals with the largest of your coverages, your dwelling coverage. In other words, the portion dedicated toward protecting your home itself.

Depending on who you ask, you’ll note that the feelings around rules can vary harshly. On one hand, without rules, life would be even more chaotic than it already is. On the other hand, some believe rules were meant to be broken.

Somewhere in the middle is where we likely find the truth and the 80 rule homeowners insurance companies typically go by, you’ll also likely find that this rings true. Below, we’re breaking down the 80/20 rule homeowner insurance lives by, why it’s important, and the other factors you can’t ignore.


What Is the 80 Rule in Homeowners Insurance for Coloradans?

Carriers in Colorado typically stick to the 80 20 rule home insurance rule. What this means is that if you don’t insure at least 80% of what it would cost to replace your home in the event of a major loss, you can’t sign up for coverage.

For example, at least in theory, if you have a home that is worth $540,000, about the average Colorado home value, you’ll need to have coverage for at least $432,000. The other 20% is somewhat assumed by the carrier, however, each company operates differently. Therefore, you’ll need to check that you aren’t required to cover more.


Understanding the Rule of Thumb for Home Insurance in the Centennial State

The 80/20 rule for Colorado homeowners is one you’ll want to understand, but not for the sake of purchasing the least amount of coverage possible. It’s because you’ll need to understand your risk when enrolling:

  • If you don’t have enough coverage, not only can you be denied coverage, but if you do sign up, you’ll have to restore the remaining losses on your own.
  • It may not seem like a big deal for some claims, though this can still mean thousands of dollars, but for a major loss, such as a fire, it can be a financial nightmare.
  • Everyone wants to protect their homes, but your homeowners policy does so much more. It’s there for you for certain liability risks, protects your personal property, and can even protect additional structures on your property.
  • Don’t fall into the common misconception of home value vs. what it takes to restore your home. You don’t need the amount you’d sell your home for, but rather what it would cost to rebuild it.
  • The real estate market may be a bit weird these days, but inflation is still affecting construction costs. If you have too little coverage, you’re going to feel it when you have to pay much more to restore your home with the right materials than you did when you first built it.


Overall, you’re going to need to have adequate coverage and account for the present and the future. Otherwise, you’ll find yourself in a very uncomfortable position should you suffer an expensive loss down the line.


Can I Lower My Dwelling Coverage in Colorado?

Typically, it’s never really advisable to lower your dwelling coverage in Colorado. This goes along with the idea that over time, even when considering variations for short-term trends, the materials and labor to rebuild a home will rise.

If you lower the amount of dwelling coverage you have for your home, you’re putting yourself at a higher risk to cover major losses with less protection. Even if you are well off, this can be an expensive endeavor that can not only take away from your home but your finances in the long term.

This is especially true, considering that for many homeowners, their place of refuge is often one of, if not, their largest investments. Many homeowners consider paying less for premiums each month to be a benefit, but with the right carrier, you can protect your home without having to overpay for protection.


Pros and Cons of the 80 20 Rule Home Insurance in Colorado


The economic reason for the 80 20 rule home insurance follows is to help you avoid unnecessary major losses on your own. Nevertheless, every home is different and there are pros and cons that come with the home insurance 80 percent rule. Let’s break them down:



You have enough coverage to enroll with most carriers.

Some homeowners may be looking to save by having less coverage.

Less risk and greater peace of mind knowing you’re covered for what may come.

You’ll need to be sure that you have adequate savings to restore major losses without the rule.

You’ll be able to get a mortgage because you have adequate homeowners insurance coverage limits.

Sticking too close to the 80 20 home insurance rule won’t account for individual needs.

Homeowners can predict their costs in the event of a loss with more clarity.

Additional documentation may become necessary. You may also not be able to purchase your home with a mortgage.

There’s really no comparison. Even if you are willing to take on the risk, it’s almost universally ill-advised. Working with a licensed insurance agent will help you make the best decision for your needs and save while doing so.

Freedom Insurance Group works with a variety of top-rated providers that don’t just pit you against the 80/20 rule but rather work with you to find coverage that meets your needs without overpaying.

A major part of what makes us so successful is our ability to compare your home insurance among many different brands that are trusted in Colorado. We work with them to provide personalized coverage, compare, and deliver you the lowest rate possible.

The 80 20 rule home insurance in Colorado abides by is important but it’s also important to assess your risks and shop around for the best protection and lowest price. We can help. Contact us at the number above or get a home insurance quote today!

Contact Us

Freedom Insurance Group
3861 Long Prairie Rd Ste 110
Flower Mound, TX 75028
Phone: (972) 798-3769


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