Balancing the cost of insurance premiums and the potential costs related to being displaced from your home, repair costs required by local building code, or higher replacement costs can be challenging for a homeowner. For Colorado homeowners, it is important to understand that they have rights to additional and/or enhanced insurance coverage options if they so choose.
On January 1, 2019, the Colorado Division of Insurance reissued Bulletin No. B-5.35 providing guidance on Colorado Statutes §§ 10-4-110.8(6)(a) and 10-4-110.8(6)(b) pertaining to the requirement that insurance carriers offer the option of certain additional coverage or coverage enhancements to Colorado homeowners, including:
- Extended Replacement-Cost coverage equal to at least twenty percent of the dwelling limit;
- Colorado Law and Ordinance coverage equal to ten percent of the dwelling limit; and
- Additional Living Expense coverage for a total of twenty-four (24) months in their homeowners’ insurance policy.
These coverage options are extremely important considerations for any homeowner. First, while the replacement-cost coverage selected when a homeowner may have been appropriate at the time they purchased the insurance policy, costs of repair, building materials, and other related issues can, and usually do, increase over time. Second, city, county, and state building codes also change to meet updated fire and safety standards, and if your policy does not include law and ordinance coverage, you could be stuck with the cost of updating insulation, electrical wiring, and/or plumbing to current code requirements, which may otherwise be excluded without law and ordinance coverage. Finally, if a disaster occurs displacing you from your home, Colorado state law requires insurance carriers to offer the option of Additional Living Expense coverage up to 24 months. This coverage provides the cost of obtaining housing during a period of displacement. While it is likely unfathomable for most to think of being displaced for two years, according to the Colorado state law insurance carriers must provide the option of this added protection.
By reissuing Bulletin No. B-5.35, the Colorado Division of Insurance has made it clear that it continues to believe these additional and/or enhanced coverage options provide significant protections for Colorado homeowners. While not every homeowner may feel the need to include these coverages, it is important to know that your insurance carrier must offer these additional or enhanced options in Colorado.