A potential property insurance crisis is looming over New Mexico, a state highly prone to wildfires, where more than one in five homeowners (23.3 percent) lack insurance coverage, according to a recent report by LendingTree. This percentage is nearly double the national average of 13.6 percent, with 11.3 million out of 82.9 million owner-occupied homes uninsured across the United States.
Rising Premiums and Lack of Coverage
Home insurance premiums have been rising in New Mexico, as well as the rest of the country, due to the increasing threat of natural disasters exacerbated by climate change. Larger catastrophe exposure and growing costs, including labor, construction materials, and repairs, have led insurers to increase premiums in vulnerable areas such as parts of California and Florida. This has resulted in a lack of availability and an affordability crisis in these markets.
New Mexico’s Insurance Challenge
Among the 572,064 homes in New Mexico, 133,340 are not covered by insurance, as per an analysis of U.S. Census Bureau data by LendingTree. In Albuquerque, 15.2 percent of homes were uninsured, ranking 18th among 100 major U.S. metropolitan areas. The state is at significant risk of damaging natural disasters like wildfires, hail, and flooding, with all 33 counties experiencing severe thunderstorms.
Factors Contributing to Uninsured Homes
The high percentage of uninsured homes in New Mexico is attributed to several factors, according to J. Tim Query, professor emeritus at New Mexico State University. Poverty is a significant factor, affecting nearly 400,000 residents, with New Mexico having the third-highest poverty rate in the U.S. at 18.55 percent. Studies show that homeowners earning under $50,000 annually are twice as likely to be uninsured.
Cost and Demographics
Another factor is the cost of home insurance, which is not cheap in New Mexico. The average premium for $300,000 worth of dwelling coverage is about $2,205, slightly above the national average. Rob Bhatt, a licensed insurance agent at LendingTree, noted that some people can’t afford homeowners insurance and must cancel their policies. New Mexico’s demographic profile also plays a role, with homeowners of color being disproportionately at risk of being uninsured.
Risks Faced by Uninsured Homeowners
Should a devastating wildfire or extreme weather event hit New Mexico, uninsured homeowners could face catastrophic out-of-pocket costs. Their only recourse might be government assistance, low-interest loans, or taking out a second mortgage, which must be repaid unlike an insurance check.
The Way Forward
New Mexico lawmakers are exploring solutions to help struggling homeowners. Governor Michelle Lujan Grisham proposed a state-run fire insurance program to ensure coverage for all homeowners. Recently, the state’s regulators temporarily doubled the maximum residential property limit for Fair Plan policies to help wildfire victims rebuild.
