Homeowner's Insurance Underinsurance

The bill requires the commissioner of insurance (commissioner) to prepare an annual report on the cost of rebuilding reconstructing homes in Colorado. in the event of a total loss. An insurer that issues or renews more than 25% of its homeowner's insurance policies in a particular region of the state at a cost that is at least 10% less than the estimate set forth in the commissioner's annual report is required to report certain information to the commissioner.

Current law prohibits an insurer from canceling or refusing to renew a policy of homeowner's insurance unless the insurer mails notice to the insured at least 30 days in advance of the effective date of the cancellation of or refusal to renew the policy. The bill increases the notice requirement to 60 days in advance of the action.

The bill creates guaranteed replacement cost coverage in homeowner's insurance, which pays the full cost to repair or replace a damaged or destroyed structure, even if the amount exceeds the policy limits. The bill specifies the factors an insurer must consider when determining the replacement reconstruction costs of a dwelling and requires insurers to disclose certain information regarding the replacement costs before issuing or renewing a homeowner's insurance policy.The bill Current law requires an insurer to offer an applicant guaranteed extended replacement cost and law and ordinance coverage before offering extended replacement cost coverage, law and ordinance coverage, or inflation protection coverage, which is defined as coverage that provides automatic adjustments of the coverage amount on the dwelling or structure being insured to protect against the impact of inflation issuing or renewing certain replacement cost homeowner's insurance policies. The bill requires the coverage to be:

• Equal to 20% of the limit of insurance for the dwelling for law and ordinance coverage (changed from 10%); and
• At least 50% of the limit of the insurance for the dwelling for extended replacement cost coverage (changed from 20%).

Under the bill, $454,088 is appropriated to the department of regulatory agencies for the 2023-24 state fiscal year for use by the division of insurance in implementing the bill.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)