A potential property insurance crisis looms over New Mexico, a wildfire-prone state where more than one in five homeowners (23.3 percent) don’t have insurance coverage—according to a recent report by LendingTree—and non-renewals are becoming more common in the most vulnerable areas.

That’s nearly double the national average of 13.6 percent, with 11.3 million of 82.9 million owner-occupied homes uninsured, LendingTree found.

Why It Matters

Along with the rest of the country, home insurance premiums have been rising in New Mexico in recent years, as the threat of more frequent and severe natural disasters is exacerbated by climate change.

Bigger catastrophe exposure and growing costs—including labor, construction materials and repairs—have led insurers to increase premiums in some of the most vulnerable areas of the country—including parts of California and Florida—leading to a lack of availability in these markets as well as an affordability crisis.

The recent wildfires in Los Angeles County, California, have proven how difficult it can be for uninsured homeowners to recover from such a devastating extreme weather event. Should a catastrophic natural disaster hit New Mexico, many homeowners stand to lose everything.

What To Know

Among the total of 572,064 homes in New Mexico, 133,340 are not covered by insurance, an analysis of U.S. Census Bureau data by LendingTree found. In the city of Albuquerque, 15.2 percent of homes were uninsured, the 18th-highest rate of 100 major U.S. metropolitan areas.

And yet the state is at significant risk of extremely damaging natural disasters like wildfires, hail and flooding. According to the National Weather Service (NWS), all 33 counties in New Mexico experience severe thunderstorms producing high winds, large hail, deadly lightning and heavy rains at some time during the year.

The state’s capital, Santa Fe, has a high natural disaster risk score, nearly 56 percent, according to risk assessment platform Augurisk.

Earlier this week, a fire expanding 238 acres in the Cloudcroft area has forced many to evacuate.

Why Are So Many New Mexico Homes Uninsured?

As often the case, New Mexico’s high share of uninsured homes is the result of a combination of factors, J. Tim Query, professor emeritus at New Mexico State University who has been teaching insurance and risk management classes for the last 18 years in the College of Business, told Newsweek.

One is poverty, which affects nearly 400,000 residents of the so-called Land of Enchantment.

“New Mexico has the third highest poverty rate in the United States at 18.55 percent,” Query said. By comparison, a little over 11 percent of Americans nationally lived in poverty in 2023, according to data from the U.S. Census Bureau.

“Studies show that homeowners making under $50,000 a year are twice as likely as the general population to be uninsured,” Query added.

Poorer Americans are not only more likely to go without coverage for their homes, but other types of insurance as well. Previous studies conducted by Query and his colleagues found that New Mexico was among the three states having the highest percentage of uninsured motorists.

Another factor, which is closely related to household income levels, is cost.

Home insurance does not come cheap in the Land of Enchantment. According to the Insurance Information Institute, the average premium for $300,000 worth of dwelling coverage in the state is about $2,205, slightly above the national average.

“Sadly, some people can’t afford homeowners insurance and have to make the difficult decision to cancel their policy,” Rob Bhatt, licensed insurance agent and writer at LendingTree, told Newsweek about why Americans often decide to “go bare”—without coverage.

“Some people can’t get insurance because their homes are considered too risky to insure. We’ve seen this in areas with severe weather or wildfire risks,” he added. “Some people can’t get insurance because they’ve had too many recent claims or have bad credit. Some people don’t get home insurance because they don’t understand how it works or don’t think they don’t need it.”

Homebuyers who need a mortgage to purchase a property will find that their lender will require them to get home insurance, though some hazards may not be included in the traditional policy. “Otherwise, it’s optional,” Bhatt said. “Unlike car insurance, homeowners insurance is not required by law.”

And then there’s New Mexico’s demographic profile.

“Studies found that homeowners of color are disproportionately at risk [of being uninsured], with an estimated 22 percent of Native American, 14 percent of Hispanic, and 11 percent of Black homeowners having no homeowners insurance,” Query explained.

“According to the Census Bureau, the race and ethnicity breakdown in New Mexico is 59.2 percent White, 47.7 percent Hispanic or Latino, 9.38 percent Native American, and 2.13 percent Black or African American,” he added.

That means that New Mexico is statistically more likely to have a high rate of uninsured homes compared to states with a less diverse population.

What Risks Are Uninsured Homeowners Facing?

Should New Mexico be struck by a particularly devastating wildfire or similar extreme weather event, “the out-of-pocket cost could be catastrophic” for many homeowners in the state, Query said.

“The only possible recourse for those folks may be to rely on local, state, and federal government assistance of some sort,” he added.

“If you don’t have insurance, the cost of rebuilding after a major disaster falls on you,” Bhatt said. “You may be able to get a grant for minor repairs, usually to stabilize your home, but not much else,” he added.

Uninsured homeowners may be able to get a low-interest loan to cover their rebuilding costs in case of major damage, but if they don’t, they may be forced to take out a second mortgage. “Unlike an insurance check, you have to repay a loan,” he said.

The Way Forward

As in many other states facing similar challenges, lawmakers in New Mexico are trying to come up with solutions that would help struggling homeowners both in the short and long term.

Earlier this year, New Mexico Governor Michelle Lujan Grisham proposed the creation of a state-run fire insurance program outside—separate from the state’s Fair Access to Insurance Requirements plan—to ensure no homeowner is left without coverage.

This week, New Mexico’s regulators temporarily doubled the state’s maximum residential property limit from $350,000 to $750,000 for its Fair Plan policies until June 20, to help wildfire victims rebuild their homes.