The Marshall Fire on December 30, 2021, changed everything for Colorado homeowners. In just a few hours, over 1,000 homes burned in what became Colorado's most destructive wildfire in history. But the shock didn't end when the flames were extinguished. For most families, the real nightmare began when they discovered their insurance wouldn't cover what it actually cost to rebuild.
Here's what happened: roughly two-thirds of Marshall Fire victims found themselves underinsured, with average shortfalls between $99,000 and $240,000 per home. Less than 10% had coverage that would actually pay to rebuild their homes completely. If you live in Colorado—especially along the Front Range or in foothill communities—this guide will help you avoid becoming another statistic.
Why Colorado's Wildfire Insurance Market Is Changing Fast
Colorado's home insurance market is under serious pressure. The average homeowners premium hit about $4,600 per year in 2024—the fourth-highest in the nation and 58% higher than 2018. Some Denver homeowners saw increases as extreme as 740%, jumping from $4,677 to $34,600 for 2025. That's not a typo.
The math is brutal: more than 321,000 Colorado homes face moderate or higher wildfire risk, representing $141 billion in potential reconstruction costs. About 12% of Colorado homes sit in high wildfire risk zones. In these areas—particularly foothill and mountain communities near Boulder, Colorado Springs, and Fort Collins—premiums regularly exceed $7,500 annually. A $500,000 cabin near Boulder in a high-risk zone can cost $4,500 or more per year just for basic coverage.
Many insurers pulled back after the Marshall Fire, refusing to write new policies in high-risk areas or non-renewing existing customers. Non-renewal rates are climbing fastest in rural eastern regions and along the urban-wildland interface on the Front Range. If you've received a non-renewal notice, you're not alone—and you do have options.
The Coverage Gaps That Caught Marshall Fire Victims
The Marshall Fire revealed three major coverage problems that most Colorado homeowners didn't know they had until it was too late.
First, replacement cost estimates were way too low. Your policy might say your home is insured for $400,000, but that number is based on pre-fire construction costs. After a disaster, everything changes. Supply chain disruptions, labor shortages, and sudden demand drive up costs fast. At $250 per square foot, the total underinsurance for Marshall Fire victims was estimated at $39 million. At $350 per square foot, that number jumped to $179 million.
Second, additional living expenses (ALE) ran out before homes were rebuilt. ALE coverage pays for hotel rooms, temporary housing, and other living costs while you can't live in your home. Most policies cap this at 12-24 months or a percentage of your dwelling coverage. With rebuilding delays from permits, material shortages, and contractor backlogs, many Marshall Fire survivors exhausted their ALE before they could move back in.
Third, actual cash value versus replacement cost caused confusion and financial pain. Many policies pay actual cash value first—that's replacement cost minus depreciation—then pay the recoverable depreciation after you've completed repairs. Colorado law gives you 365 days after your ALE expires to replace contents and collect that depreciation, but if you don't understand the timeline, you can miss out on thousands of dollars.
How to Protect Yourself: Coverage Options and Mitigation
You can't eliminate wildfire risk in Colorado, but you can significantly improve your insurance protection and reduce your premiums. Start with your coverage limits. Don't trust the default estimate your insurer provides. Get an independent replacement cost estimate that accounts for local building codes, current material costs, and post-disaster inflation. Update this estimate every year. If construction costs in your area go up 15%, your coverage should too.
Consider extended replacement cost coverage or guaranteed replacement cost if you can get it. Extended replacement cost pays a percentage above your dwelling limit—usually 25-50% more—if rebuilding costs exceed your coverage. Guaranteed replacement cost pays whatever it actually costs to rebuild, with no cap. These endorsements cost more upfront but can save you hundreds of thousands if disaster strikes.
Now for the good news: you can lower your premiums through wildfire mitigation. Installing Class 4 impact-resistant roofing earns you 10-20% discounts from most carriers. Creating and maintaining 30 feet of defensible space around your home—clearing brush, trimming tree branches, using fire-resistant landscaping—can qualify you for additional credits. Add ember-resistant vents, and you're even better protected. These improvements don't just save money on insurance. They dramatically increase your home's chances of surviving a wildfire.
New legislation in 2025 introduced mitigation credits and state-backed reinsurance to slow premium growth. House Bill 1182 requires insurers to tell you how you can reduce wildfire risk and pay less in premiums. It also gives you the right to appeal assessments of your property's wildfire risk. If your insurer rates your home as high-risk but you've installed fire-resistant materials and cleared defensible space, you can challenge that rating.
What to Do If You Can't Get Coverage
If private insurers have non-renewed you or declined coverage, Colorado's FAIR Plan launched in mid-2025 as your safety net. The FAIR Plan (Fair Access to Insurance Requirements) is a state-backed insurer of last resort. It's not cheap—expect to pay more than you would with a standard carrier—but it keeps you from going uninsured. You can only access the FAIR Plan if you've been rejected by private insurers or if you're rebuilding after a covered loss.
Shop around aggressively before resorting to the FAIR Plan. Work with an independent insurance agent who represents multiple carriers. Different companies assess wildfire risk differently, and one might offer you coverage where another won't. An agent familiar with Colorado's high-risk areas knows which carriers are still writing policies and which mitigation improvements matter most for underwriting approval.
Lessons From Marshall Fire Survivors: Document Everything
If you ever need to file a claim, the Marshall Fire taught survivors one critical lesson: get everything in writing. If your adjuster makes a verbal commitment, send a follow-up email asking for confirmation. Create a paper trail for every conversation, every estimate, every deadline. This documentation becomes essential if disputes arise during rebuilding.
Marshall Fire survivors also learned the value of experienced disaster rebuilding contractors. Builders who specialize in wildfire reconstruction know how to navigate insurance claims, handle code upgrades required for rebuilding, and access available incentives. They're worth the investment. And if your claim is unnecessarily delayed by your insurance company, you can request an extension of your ALE coverage for the number of days or months the company delayed your claim.
Take Action Now
Colorado's wildfire risk isn't going away, and insurance markets will keep tightening. But you're not powerless. Review your policy today—not tomorrow, today. Check your dwelling coverage limit against current replacement costs. Ask about extended replacement cost coverage. Identify mitigation projects that can reduce your premiums and protect your home. Create defensible space. Install fire-resistant materials.
The Marshall Fire showed us that being underinsured isn't a hypothetical problem—it's a financial catastrophe waiting to happen. Don't wait for the next fire to find out if you're protected. Get a quote, review your coverage, and make sure you're not leaving yourself exposed to six-figure gaps that could derail your recovery when you need insurance most.
