The Colorado Fair Plan has officially begun issuing insurance policies, marking a significant step for homeowners and businesses in the state. This initiative comes two years after Colorado passed legislation to create an insurer of last resort, as reported by AM Best.
The Colorado Fair Plan aims to provide essential property coverage for those who cannot secure insurance through traditional private markets. Kelly Campbell, the executive director of the program, noted that the plan was developed with insights from other states that have similar programs. In particular, the California Fair Plan shared valuable lessons about both challenges and successful strategies.
To qualify for a policy under the Colorado Fair Plan, applicants must have been denied coverage by three admitted insurers. The coverage includes basic perils like fire and lightning, with limits set at $750,000 for residential properties and $5 million for commercial buildings. Additional coverages, such as for wind and hail, can be purchased separately. All policies are issued on an actual cash value basis.
Campbell emphasized that the Fair Plan is not intended to be the first choice for insurance but rather a safety net for those who have exhausted other options. "We are a basic coverage option with higher costs that reflect the higher risks of the properties we insure," she explained.
As of December 2024, it is estimated that around 1% of properties in Colorado, roughly 29,000 structures, may qualify for coverage under this plan. Importantly, current policyholders with existing coverage do not qualify for the Fair Plan. The goal is to ensure that this program serves as a last resort for those really struggling to find insurance.
Campbell also highlighted the role of insurance agents in shaping the program, as they provided feedback on the challenges their clients face in obtaining coverage. Colorado is now the first state to launch a new Fair Plan since Hawaii introduced a similar program in 1991. Currently, 33 states and Washington, D.C., operate Fair Plans.
The Colorado Division of Insurance did not respond to requests for comments regarding the launch of this program. However, the Fair Plan is expected to play a crucial role in providing coverage to those who need it most, filling a gap in the market for property insurance in the state.