Roughly four out of five policyholders who reported total property losses from the late 2021 Marshall Fire in Boulder County, Colorado, do not have sufficient insurance coverage for their rebuilding costs, according to data from the Colorado Division of Insurance (DOI). The Colorado DOI is engaged in an ongoing analysis of losses from the fire versus insurance coverage. It reported that 1,084 properties were destroyed during the event but only 951 of those claims are part of their analysis. The remaining properties are either high-dollar homes or rentals and therefore not part of this study of standard homeowners' insurance policies. The department is collecting claims data from 27 insurance groups that together represent 97% of the homeowners' insurance market share in Colorado. "Before diving into solutions that tackle underinsurance, we needed to determine the potential size and scope of the problem," Colorado Insurance Commissioner Michael Conway said in a recent statement. "We will continue to analyze the claims data as it comes in from the insurance companies. However the challenge now and going forward will be nailing down reliable rebuilding costs." The fast-moving wildfire impacted the municipalities of Boulder, Louisville and Superior. Environmental conditions stocked what started as a grass fire in these areas north of Denver and grew in a matter of minutes to become one of the most destructive wildfires in the state's history. The Colorado DOI reported the total incurred claims dollars from the event to be more than $1.02 billion. According to the department: "Of the 951 total loss claims analyzed, 76 homes had guaranteed replacement coverage, meaning that the insurance policy on these homes provides coverage for replacement of the home with similar quality, square footage, finishes, etc., without a cap, meaning underinsurance is not a problem for these homes. These 76 homes represent 8% of the homes in the analysis." The higher the cost to rebuild per square foot, the more prevalent the underinsurance problem, the Colorado DOI reported. Underinsurance is driven by a number of factors, according to FC&S Expert Coverage Interpretation. These factors include: |

• Insureds wanting a lower premium, which pushes some insurance agents to adjust the replacement cost.
• Using market value as replacement when the two are completely different; what you can buy it for has nothing to do with the costs to remove the debris and rebuild. Many insureds often don't understand that.
• The current global supply chain challenges. (As of February 2022, lumber prices were triple what they were pre-pandemic. Some sources report the increase in lumber costs now adds roughly $19,000 to the cost of building a house.)

See also: |

• What to do about the crisis of underinsurance
• How to fix the widespread underinsured-home problem
• 3 ways to protect yourself from uninsured and underinsured motorists