Those of us lucky enough to live in the beautiful Centennial State know that the cost of living has been steadily rising the past few years. According to a Forbes article published in October 2018, the required income to live comfortably increased by 35.61% for Colorado Springs and 23.98% for Denver between 2017 and 2018. On a list of 20 cities with the most significant cost of living increase over that year, Colorado Springs came in at #1 and Denver was #16.
The most noticeable impact to the cost of living is the rising housing prices, but the increasing cost of insurance is also making an impact on the average budget. While nobody really wants to pay more for insurance, it can be helpful to understand why the rates have been increasing and what you can do to help lower your costs without sacrificing important coverage.
1. Colorado is experiencing a population surge
The increasing population in Colorado has resulted in more vehicles on the road, more accidents and more expensive auto insurance. The Denver Post published a story about the growing population in Colorado and found that the population increased by approximately 80,000 people just last year. The US population increased by .6% between 7/01/17 and 7/01/18, whereas Colorado's population increased by 1.4% during that time. That is a significant increase in the number of cars on the road, without more roads to disperse the traffic.
Anyone that has lived in Colorado for at least 5 years would have a difficult time ignoring the rapidly worsening traffic. I remember when I first started driving back in 2007, it took me about 15 minutes to get from Westminster to Denver, and vice versa. Now when I drive to Westminster to see my family, I have to leave at least 45 minutes before I am supposed to be there, and even that is cutting it close. Unfortunately, the length of time it takes to get from point A to point B is not the only thing affected by the increasing population.
When the roads become congested, the number of accidents tend to increase accordingly. The more accidents there are, the higher insurance premiums become for everyone in the area, not just the people that have had an accident. Rates are increasing even for drivers that have not been involved in an accident since most drivers in Colorado are statistically more likely to be involved in an accident than they were 5 or 10 years ago due to the increased frequency of accidents.
While there isn’t much we can do about the increasing population, we can at least try to consolidate trips, like stopping at the store on the way home rather than making a separate trip. We can also focus on trying to carpool to decrease the number of cars on the road. Driving less can also help your insurance rates since you could potentially qualify for a low mileage discount. Those may be small measures, but every bit can help.
2. Technology in vehicles is advancing
Every year the new vehicles manufactured have more technology and cost more to repair than they ever have in the past, making the cost of the average claim higher. Many vehicles now have backup cameras, window sensors, forward looking radar, side impact warning systems, and even self-driving or self-parking features. In the past, if your vehicle was damaged you could take it to your local repair shop and have it repaired by a mechanic. With the technology now found in newer vehicles, many mechanics are unable to complete all necessary repairs since it often takes special training to repair damaged technology. As a result, more and more vehicles are being taken back to the dealership for repairs, which tends to come with a higher average repair cost. Since mechanics are losing business to dealerships, many shops have been forced to increase their labor costs to make ends meet.
3. There are more distracted drivers
The number of people driving while distracted has been steadily increasing since smart phones were released. Although phone activity is one of the biggest culprits for distracted driving accidents, there are other forms of distraction that can divert attention from the road, including eating or drinking, changing the stereo or navigation, and talking to passengers in the vehicle. An article from National Highway Traffic Safety Administration equates sending or reading a text while traveling at 55 mph, which may only take your eyes off the road for 5 seconds, to “driving the length of an entire football field with your eyes closed.” The same article estimates that approximately 481,000 drivers are using cell phones while driving during daylight hours, causing around 391,000 injuries from accidents involving distracted drivers just in 2015.
When I am stopped at a traffic light, I often look around at the drivers on either side of me. It is frankly appalling to see how many drivers are either looking at their phones, eating, putting on makeup, or engaging in some other type of distraction. Granted, they are stopped at a light, but a good portion of those drivers are likely to continue that distracted behavior after the light turns green and they start to drive. If you’re curious like me, just glance around when you are stopped and see how many drivers you can count that aren’t focused on driving.
One thing you can do to hopefully reduce the amount of distracted driving and as a result, lower the cost of insurance in the future, is to abstain from distracted behavior while you are driving. Talk to your friends and family if you see them using their phones or doing their makeup in the car and explain the risks they are causing and how their actions can impact others. If we all make an effort to pay more attention, we can reduce the number of accidents and the severity of accidents.
4. Colorado likes to litigate
Colorado is an especially litigious state, and with more and more accidents resulting in lawsuits, the payout for the average accident has increased. Insurance is meant to indemnify you, or make you whole again, in the event of a loss, not to better your financial situation. More often than not, when a lawsuit is filed after a car accident, the insurance company ends up paying out above and beyond the cost to repair injuries and damaged property. As a result of the increasing number of personal injury attorneys and lawsuits filed in Colorado, the average cost of auto claims has increased drastically. When insurance companies are forced to payout higher amounts than normally required in an accident, that causes the rates to increase across the state.
Insurance is a shared risk, meaning that the premiums that are paid essentially go into a pool of money, which is what is used to payout whenever there is a loss. That takes a large portion of the risk away from each individual and spreads it out so that if you have a loss you’re not stuck paying the full loss out of pocket. But the funds paid out for losses have to come from somewhere. When the average cost of a claim increases, the total premiums being paid into that pool of money need to increase accordingly to ensure there is always enough in reserve to payout for future losses and catastrophes.
If you want to learn more about personal injury attorneys in Colorado, please read our blog Why does Colorado have so many personal injury commercials?
5. It hails a lot in Colorado
Hail, hail, and more hail! We all know that Colorado is one of the most hail-prone states in the country, which has been a reality for quite some time now. One difference between Colorado and the other states in “Hail Alley” is that the thin air at our elevation causes the hail to fall faster and hit harder. According to a meteorologist in a 9 News article, the hail in Colorado can be up to 8% more damaging than hail that falls at sea level.
Though Colorado has been subject to catastrophic hail storms for decades, the increasing population density in the Denver-Metro area has resulted in significantly higher costs associated with each storm. With more people moving to Colorado, there are more vehicles being damaged by hail and more homes being built, causing more hail claims than ever before. Simply put, the hail that used to hit the ground is now hitting more cars and structures.
The best way to protect your vehicle from hail damage is to park in a garage or under a carport whenever possible. There are not many ways to protect your home from hail, but many roofing companies offer Hail Resistant roofing which can lessen the damage to your roof. If you have a Class 4 Hail Resistive Roof (the most hail resistive), you may even get a discount on your homeowners insurance.
When catastrophic hail storms hit, the area is likely to run out of rental cars and repair shops become booked for months, if not a year out. Both of those occurrences drive up the cost of the average rental car as well as the cost of repairs. There is also a large prevalence of out-of-state roofing companies that flock to the impacted area to prey on hail victims, often charging highly inflated rates or even taking money and disappearing without completing a single day of work, which drives up the cost of the average claim.
If you do have hail damage on your home, here are some tips for finding a reputable roofing company or contractor without being taken advantage of:
- Only work with licensed, insured contractors.
- Get multiple estimates.
- Look at reviews and ask for references.
- Don’t pay in full or sign a document confirming completion until the work is done to your satisfaction.
- Review all documents and make sure you understand before signing ANYTHING.
These are just some of the costliest hail storms that have hit Colorado since 2009:
7/20/2009 in Denver Metro: $767.6 Million
7/29/2009 in Pueblo: $232.80 Million
7/13/2011 in Colorado Front Range: $164.8 Million
6/6-7/2012 in Colorado Front Range: $321.1 Million
9/29/14 in Englewood: $213.3 Million
7/28/16 in Colorado Springs: $352.8 Million
5/8/17 in Golden: $2.3 Billion
6/13/18 in Colorado Springs and Fountain: $169 Million
6/18-19/2018 in Denver Metro and North Denver: $276.4 Million
One thing to remember when you get your renewal offer and see that the premium has increased is that unless you have filed a claim or had a violation, the increase is likely not specific to your policy and you are not alone. The rates for both auto and homeowners insurance policies have increased all across the state of Colorado. While every insurance carrier is different and every policy will not see the exact same premium impact, we are all in the same boat and our rates are increasing for many of the same reasons.
Many of the factors that are driving rates in Colorado through the roof are out of our control, but there are some things you can do to lower your insurance costs without sacrificing coverage. First and foremost, play your part in reducing accidents by paying attention and reducing the number of unnecessary trips. Most auto insurance policies offer a low mileage discount if you drive under a certain number of miles each year, usually that cutoff is around 8000 miles/year. Use the technology in your new vehicles to help with safe driving, not as a distraction from the road.
On both your auto and homeowners policies, you can look into increasing deductibles as a means of saving on premium. Many homeowners insurance carriers offer a separate deductible for wind or hail related losses, so you could increase just that deductible while keeping your all-perils deductible low.
If you end up getting a new roof, call your insurance provider or agent to see if the new roof qualifies you for a better rate. While insurance does not cover betterment and as a result will not pay for you to upgrade to a hail-resistant roof, it may be worth considering paying the difference in an effort to avoid costly claims in the future, and you may even get a discount for having a Class 4 roof.
These are just some of the ways you could potentially save, but remember that every carrier and policy is different so it is best to call your agent to discuss any additional possibilities that may be available to you.