Protecting the peaks: Recognizing current insurance risks in the mountain states

Majestic views and thrilling outdoor adventures, combined with the unique geographical conditions across the Mountain States, continue to attract millions of Americans every year who purchase seasonal second homes or work remotely and permanently flock to leave city life behind. While the population increase across these states (Arizona, Colorado, Idaho, Montana, and Nevada) has generally led to more favorable economic conditions, the evolving climate changes, rugged terrain, dense forests, open meadowlands, and flowing river valleys create “perfect storm” conditions for natural disasters to strike which pose heightened risks to property owners.

Over the past five years, these Mountain States combined have experienced up to $29.5 billion in disaster-related losses, mostly in repairs and replacements due to drought, flooding, freezing, severe hail, wildfires, and winter storms. As changes in climate conditions occur, each state may be more susceptible to the increased frequency and intensity of these disasters in future years. Here are key highlights of each state’s recent disaster events and costs over the past five years, along with the potential natural disaster risks that could impact them: 

Arizona experienced nine events, costing $1 billion to $2 billion. Natural disasters that could pose additional risks:

• Drought: Extreme dry conditions in the summer months can easily spark fires.
• Wildfires: Increased risks occur when drought conditions are elevated.
• Flooding: Prone to flooding from snowmelt, particularly in canyons and river valleys.

Colorado experienced 22 disaster events, costing $10 billion to $20 billion. Colorado has conditions that put it at higher risk for:

• Wildfires: Exacerbated by climate change, dry conditions increase risk, particularly in forested and mountainous areas.
• Hail: Varied terrain and climate change increase the intensity of hail events, particularly in the spring and summer months. 
• Snowstorm: Heavy snowfall poses multiple risks to property and travel, with the snowiest months being March and April. 

Idaho experienced six disaster events, costing $1 billion to $2 billion. The two primary disaster-related issues that could lead to additional risks for Idaho include:

• Drought: Extreme dry conditions are caused by a prolonged period without measurable precipitation.
• Wildfires: Increased risks occur when drought conditions are elevated.

Montana experienced eight disaster events over the past five years, costing $2 billion to $5 billion. Natural disasters that could pose additional risks to Montana property owners include: 

• Wildfires: Increased risks, especially in forested areas during dry seasons.
• Flooding: Prone to flooding from snowmelt and heavy rainfall, particularly in river valleys.
• Severe Weather: Hailstorms and winter storms are becoming more prevalent and dangerous.

Nevada experienced six disaster events, costing up to $500 million. Natural disasters that could pose additional risks include:

• Wildfires: Similar to its neighboring states, Nevada faces a growing risk of wildfires, particularly in rural and mountainous areas.
• Flooding: Flash floods can occur, especially in desert areas where heavy rains can lead to rapid runoff.
• Severe Weather: Certain areas in Nevada are also at risk for seismic activity, particularly near fault lines.

Uneven insurance terrain challenges property owners

The significant losses over the years in these Mountain States have resulted in insurance availability and affordability challenges for property owners. In a recent study, nearly 70% of successful individuals reported overpaying to be underinsured—and this is becoming more of a concern in these states.

In fact, over the past several years, these Mountain States have started to experience the burdens that their surrounding states have already encountered: rising homeowners’ and automobile insurance rates, non-renewal of coverage, and insurance companies leaving the state, coupled with rising disaster-related risks.

For example, Colorado is experiencing some of the steepest rises in insurance rates—the city of Castle Rock reported an increase of up to up to 600%. While not as dramatic,  Colorado has similarly experienced an average of a 60% increase in homeowner insurance premiums over the past five years and is ranked fifth highest in the cost of premiums among all states (average homeowner’s annual rate = $7,384 for a home value of $1 million). Experts predict that the most recent wildfires in nearby California may lead to even higher increases in 2025. 

While Arizona, Idaho, Nevada, and Montana haven’t experienced as high a percentage of insurance increases as Colorado, they have not been immune to increased premiums. Currently, homeowners pay the following average premium amounts per year based on a $1 million home value:

Arizona: $5,161              Idaho: $5,288
Montana: $5,825           Nevada: $4,135        

Steady climb in rates for vehicle coverage

When it comes to auto insurance, vehicle owners in these states are experiencing rate increases and access to fewer insurers, but not at the same rate as homeowners’ insurance. Nationally, reports indicate that car insurance premiums will rise an average of 7.5% in 2025. While it’s the seventh straight year premiums will go up, this year’s projections are down from 16.5% in 2024. What’s interesting is that Nevada and Colorado are ranked 4^th and 5^th, respectively, in paying the highest auto insurance premiums out of all states, while Idaho pays the least out of all states.

State legislators are “clipping in” to help

Navigating the insurance market in the Mountain States can sometimes be like driving up the steepest and curviest mountain peaks. Fortunately, homeowners in some of these states are starting to get help from their state legislators, who are “clipping into carabiners” and working to pass bills to mitigate homeowner risks in their states.

Currently, Colorado legislators are working on these measures:

• One bill would establish two programs in the state. One would help homeowners install hail-resistant roofs so they can qualify for insurance discounts. The second program would create a state reinsurance fund to offset wildfire insurance costs embedded in premiums. 
• Another bill would allow homeowners to appeal their wildfire risk score so they can get credit for mitigation work they’ve done and release more information to homeowners about insurance discounts. 
• In addition, as a last resort, the Colorado FAIR Plan, which was established in 2023, is available to help property owners obtain insurance for properties at extreme risk of natural disaster. 

Additional considerations in other Mountain States include:

• Montana is considering creating a FAIR Plan similar to Colorado’s that would help homeowners obtain insurance coverage.
• While Idaho isn't currently considering a FAIR Plan, its Department of Insurance (DOI) has proposed a Wildfire Risk Reinsurance and Mitigation Pool that would  provide voluntary reinsurance for insurers operating in high-risk areas. In addition, Idaho’s DOI is proposing a fund that provides grants to consumers to help them harden their homes against fire risks.
• Arizona’s Department of Insurance and Financial Institutions is forming a new council to address the availability and affordability of homeowners’ insurance throughout the state. 
• Nevada’s insurance commissioner is working with state constituents to address homeowner uninsurance rates due to insurance companies leaving the state. 

What to do next: Proactive risk mitigation tips

Proactive risk mitigation strategies are common requirements for insurers. For Mountain States, following these mitigation efforts can help improve your insurability.

Reduce wildfire risk by creating defensible space.

Defensible space describes the area within five feet of a structure. Keep this area clear of flammable material, such as cypress, juniper, evergreen plants, and wood mulch. Please visit IBHS.org or NFPA Firewise for guidance on home hardening and defensible space.

Minimize hail damage with smart roofing choices and maintenance.

Have your roof inspected at least once a year by a licensed roofer. Having the roof inspected annually will help with your insurance company, as carriers are watching homes much more closely to look for potential hazards to a roof.

Set up temperature monitoring.

If you live in an area where temperatures drop below 32 degrees Fahrenheit, it is critical to have your alarm company add monitored low-temperature sensors to your home. If the temperature inside the home hits below a pre-set threshold of your choice  your alarm system will alert you.