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Climate Change Rocks Property Insurance Premiums

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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 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 make 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; and
  • Raise your deductible to an amount that you could manage if disaster strikes. 

Above all, recognize the climate change is real and learn what you can do to deter it.

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