New Mexico is a great place to live when it comes to weather. Some studies show that New Mexico is also one of the safest places to live when it comes to natural disasters. We have no hurricanes, intermittent minor floods, limited tornadoes. Wildfires are one of the few risks.
All this sometimes leads us to believe we aren’t impacted by climate change. Think again. All you need to do is look at your property insurance premiums.
My attention was drawn to this in 2022 when the property insurance premium on my house in Hillsboro jumped by 42 percent. I called my insurance agent. Two things generated the increase: COVID-19 impacts on product availability and cost and increased climate disasters around the country.
The first idea was to lower the replacement value of the house, which I thought was high. Because New Mexico is a “replacement value” state, the increased value is determined by the insurer based on a formula and other factors: proximity to fire stations and hydrants and location within fire zones. Lowering the value was not an option.
The second approach was to increase the deductible, which was under $1,000. By increasing the deductible to $5,000 the premium was reduced to the previous year’s amount. (The deductible is the amount the insured would pay before coverage kicks in)
Then this year’s bill arrived. My premium once again jumped about 35 percent. This year it was clear; the cause was climate-related events driving more claims than ever before.
The ISO (Insurance Services Office) recently changed rating criteria including proximity to a fire zone (from 5 miles to 50 miles). Wildfires had increased in intensity and radius.
In Hillsboro we have a volunteer fire department and equipment station. As the gateway to the Gila Forest, we fall within the fire hazard zone. Luckily, we do have fire hydrants and, during fire season, a fully staffed fire watch tower in the Gila.
All of this helped me understand increases in insurance costs for my Hillsboro house.
My bill for my primary residence in Albuquerque came at the same time. Another surprise! The premium increased by 67 percent. Once again, I raised the deductible and reduced the increase to “only” 30 percent.
Climate change, climate change.
This is not just my story but the story of homeowners here and everywhere.
In Florida, Louisiana and California some of the largest insurers, including State Farm, Farmers, and AAA, have withdrawn from the residential insurance market due to catastrophic climate events.
In California, 6,000 condominium projects are currently uninsured. Santa Fe projects are struggling with the same issue.
Increased drought caused by climate change makes parts of our state more susceptible to wildfire disasters with floods in the aftermath. But in New Mexico, companies haven’t exited the market, they just decline to renew residential policies in vulnerable places.
Unaffordable and unavailable is becoming a common story for homeowners.
In Louisiana the Commissioner of Insurance said recently, “We would have to be blind and dumb not to recognize climate change as a factor.”
In some cases, where no mortgage exists, homeowners decide they can’t afford the cost and decline coverage. This is particularly true of homes passed down through generations in New Mexico. If the house is destroyed, everything is lost.
Given what is happening, homeowners are searching for how to get the best coverage for a manageable price. Here are some ideas:
- Pay more attention than ever before. Ask questions. Shop around.
- Read the small print. As premiums increase, make sure your coverage is not diluted.
- Raise your deductible to an amount that you could manage if disaster strikes.
- Above all, recognize that climate change is real and learn what you can do to deter it.
The insurance issue is a real issue, and one that will leave New Mexicans in a hard place if leaders do not take action and demand better from insurance providers, or require it through regulation, as insurance is a regulated industry in NM. With high rates of inflation on household expenses for 2+ years now, combined with record growth in real estate prices, and significantly higher interest rates, New Mexicans are already on the hook each month for a lot more money than 3, 4, 5, 10+ years ago, and relative to other states and metro areas, wages in this state remain low. The cost of living in NM might appear lower than other states, but in proportion to the incomes earned here, and given the high % of the population relying on various forms of assistance, life in NM is becoming less and less affordable for too many individuals and families that live here. In 2022, insurance premiums in NM increased 47%, on average, 2nd only to Florida, where premiums were up more like 60%. And, in 2023, we lead the way with the highest increases in premiums per Value Penguin. The average homeowner’s premium in NM is currently $1151, compared to $1,241 in California, where the average home price of $695,000 is nearly double that of New Mexico’s. Arizona, Utah, Nevada, Idaho, Oregon & Washington all have premiums averaging between $200-400 less per year, combined with higher average home prices. New Mexico is also one of the least densely populated states, with far less people per sq mile than any of our neighboring states and the other states listed above, and the total population is smaller than most states. Therefore, there are fewer properties to be damaged when weather events occur. There is more space between properties, and much of the state is rural, undeveloped, or agricultural land. Yes, due to the dry climate and other factors, wildfires create risk, but let’s keep in mind that our wildfires are not sparking within the ABQ metro or other more densely populated town, nor do we have multi-million dollar mc mansions piled on top of each other on our hillsides. In fact, many residents that have mobile homes or limited incomes in areas where fires and floods have occurred do not have insurance at all, which means that they do not burden the private insurance industry. After it was established that the 2022 Hermit’s Peak Calf Canyon fire was caused by Federally mandated controlled burns, the federal government setup a massive $4 billion fund to compensate victims and cover the cost of the wide ranging losses caused by the State’s largest wildfire ever. We cannot simply chalk off these massive premium hikes to climate change.
Crime, and specifically property crimes like burglaries, break-ins, theft of personal property are alarmingly high in this state, but they have been for many years, and property crime rates do not appear to have increased in recent years.