Last April, Gov. Jared Polis of Colorado signed legislation creating a hail mitigation grant program for homeowners – a significant step for a state that leads the nation in hail insurance claims and ranks second in homes exposed to wildfire risk. The program, called Strengthen Colorado, would fund impact-resistant, hail-fortified roofs for homeowners. Its funding mechanism: a blanket 0.5% fee on home insurance policies.
That detail drew quiet concern from insurance carriers. And for Carole Walker, executive director of the Rocky Mountain Insurance Information Association, it serves as a cautionary signal for any state weighing how to pay for the risk-reduction programs the industry increasingly views as existential.
"Putting the fee on policies is something that is unique to Colorado, in part because the state doesn't have any money," Ms. Walker said. "They are broke – they are one billion dollars in the hole," she added, referring to Colorado's $1.2 billion deficit, the result of a state tax policy tied to federal law that changed in August 2025.
Colorado's legislation prohibits carriers from passing the 0.5% fee directly to policyholders. But as Ms. Walker noted, "while it's not a direct surcharge, it is something that is ultimately passed on to policyholders." The program's stated goal – reducing average premiums by $800 a year through home hardening – risks being undermined at the outset by the very mechanism designed to fund it.
In Ms. Walker's view, the most sustainable approach is one where mitigation grants are "supported through premium tax dollars that insurance companies already pay to states" – funds she describes as insurance consumer money that should, logically, be directed back toward the consumers who generated them.
The distinction is meaningful. Premium tax dollars represent an existing obligation rather than a new legislative cost; redirecting a portion into a grant program does not add to a carrier's expense base the way a policy fee does.
American insurance companies paid more than $28 billion in premium taxes in 2024 – a figure that has grown between 40 and 70% in most states since 2019. The distribution is highly uneven: Texas alone collected $4.3 billion, while the bottom ten states collected less than $200 million each.
U.S. Census Bureau, Annual Survey of State Government Tax Collections · 2024
Insurance premium tax collections by state
Hover any state for detail.
Source: U.S. Census Bureau, State Government Tax Collections Survey (STC). 2024 data; 2019 as pre-pandemic baseline.
Don Griffin, senior vice president of policy and research at the American Property Casualty Insurance Association, which represents more than two-thirds of the US property casualty market, underscored the sensitivity of adding to that burden. "If you look over the past three or four decades, the return on equity for homeowners' insurance is 2%," he said. "It's not a huge profit margin." Colorado's additional 0.5% policy fee, layered on top of the roughly 2% premium tax carriers already pay in most states, represents meaningful pressure on an already thin bottom line.
Colorado's challenge is not unique. States are piecing together resilience funding under significant budget pressure, reaching for tools that vary widely in their effects on carriers and consumers alike.
The federal backstop most states once relied upon has been thrown into uncertainty. The Building Resilient Infrastructure and Communities program – which channeled pre-disaster mitigation grants to states, municipalities and tribal governments – was abruptly cancelled by FEMA in April 2025, halting roughly $3.6 billion in projects midstream. After a coalition of 22 states sued, a federal court ruled in December 2025 that the cancellation was unlawful. FEMA was ordered to reinstate the program in March 2026, releasing a combined FY2024-2025 funding opportunity worth $1 billion. Critics note that figure represents a fraction of the estimated $100 billion a year the country needs to invest in disaster resilience. Applications for the current cycle close July 23, 2026.
Congress has also weighed in: a bill introduced last year would establish a national mitigation grant program funded by at least 35% of the net investment income from a proposed federal reinsurance fund, directed toward government and nonprofit initiatives to strengthen homes. The American Property Casualty Insurance Association has expressed support for that framework.
At the state level, the contrast in models is stark. Florida's 2025-2026 budget includes more than $600 million for home and condominium risk–mitigation programs – enough to clear a waitlist of 45,000 property owners under its My Safe Florida Home grant program and add 10,000 new slots, with grants of up to $10,000 per qualifying homeowner.
Mississippi, by contrast, recently moved backward. The Strengthen Mississippi Homes grant program was shut down after the state legislature removed the Insurance Department's spending authority during a special session, leaving Mississippi as the only coastal state without a home-hardening program managed by an insurance regulator and overseen by a state auditor. A replacement mitigation trust fund has been proposed by the Mississippi Surplus Lines Association, but no legislation has passed.
U.S. Census Bureau STC · FEMA OpenFEMA
Premium tax revenue vs. BRIC funding
Each dot is a state.
Source: Census + FEMA
Several states have moved to complement or substitute for grants with tax-based incentives. Alabama, Mississippi and South Carolina have established tax-advantaged catastrophe savings accounts that allow homeowners to set aside pre-tax dollars for deductibles and disaster repairs. Alabama went further in 2025, expanding eligibility to cover the cost of FORTIFIED roof endorsements and pre-disaster retrofit work – making it one of the first states to let homeowners fund mitigation directly through a tax shelter rather than waiting for a post-storm payout.
Louisiana's approach has produced measurable results. Homeowners who upgraded their roofs to FORTIFIED standards saw an average annual premium reduction of 22%, according to a report from the Louisiana Legislative Auditor, with more than a quarter of participants saving $2,000 or more per year. The state offers a $10,000 income tax credit for FORTIFIED roof installation and, as of January 2026, a deduction worth up to $10,000 for voluntarily retrofitting a home. In April 2026, Louisiana's insurance department went further still, requiring every property insurer in the state to provide mandatory premium discounts on FORTIFIED-designated homes by January 1, 2027, with discount levels prescribed by a benchmark table developed by the National Association of Insurance Commissioners.
"In Louisiana you can get a $10,000 tax credit for putting on a fortified roof," said Michael Newman, head of public policy at the Insurance Institute for Business and Home Safety. "You've got catastrophe savings accounts that are starting to take off where families can put money in a tax-advantaged way."
One structural barrier, however, remains unaddressed at the federal level. "If you do get money from the state for a grant to do something on your property to make it more resilient, the IRS still treats that as income – it's taxed," Mr. Griffin said. Legislation introduced in Congress would align the tax treatment of disaster mitigation grants with that of energy conservation rebates, which are already exempt from federal income taxes – a change Mr. Griffin described as among the most effective steps Congress could take to accelerate private uptake of state programs.
The lending community is also beginning to move. Credit unions are now offering lower-interest home equity loans specifically for disaster-resilience investments, Mr. Griffin noted. Some mortgage lenders are beginning to fold resilience improvements into the loan itself. "It doesn't cost that much to build in some of those resilient materials at the time" of new construction, he said. "It costs less than to try and retrofit it, for sure."
Mr. Newman offered a private-sector framework for assessing which public-sector levers actually move the needle. Grant programs, he said, are "absolutely the most effective public policy lever we have seen" – not because they cover most of the work, but because of what they catalyze.
"Public investment is the catalyst, but private markets are the engine," Mr. Newman said. In Alabama, where the Strengthen Alabama Homes grant program seeded the country's most mature FORTIFIED market, grants now account for less than 20% of the state's roughly 59,000 FORTIFIED Home designations. The rest came from private homeowners who saw what their neighbors had done and chose to invest for themselves – supported by contractors who built supply chains specifically for FORTIFIED retrofitting because public grants first created the business case. Alabama property owners now see insurance rates 20 to 40% lower than those in neighboring Mississippi – a gap that has become one of the most cited data points in state-level policy debates from Texas to the Carolinas.
For states watching Colorado's experiment closely, Ms. Walker's framing may be the most important takeaway – not the program itself, but the lesson embedded in how it was financed.
"We really do have to come up with solutions that are long-term," she said, "with sustainable funding sources that really don't add to the expense that brings premiums."
