Climate change raises property insurance premiums

By DIANE DENISH
From corner to corner
© 2023 News Services of New Mexico

New Mexico is a great place to live weather wise. 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 light flooding, limited tornadoes. Forest fires are one of the few risks.

All this sometimes leads us to believe that we are not affected by climate change. Think again. All you need to do is review property insurance premiums.

This was brought to my attention in 2022 when the property insurance premium on my house in Hillsborough jumped 42 percent. I called my insurance agent. Two things are generating the increase: the impact of COVID-19 on the availability and cost of products and increased weather disasters across the country.

The first idea was to reduce the restoration 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. Depreciation was not an option.

The second approach was to increase the deductible that was below $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 have paid before the coverage went into effect.)

Then this year’s bill arrived. My premium jumped again by about 35 percent. This year it was clear; the reason is climate-related events causing more claims than ever before.

The ISO (Insurance Services Office) recently changed the rating criteria, including proximity to a fire zone (from 5 miles to 50 miles). Forest fires increased in intensity and radius.

We have a volunteer fire department and equipment station in Hillsborough. As the entrance to the Gila Forest, we enter the fire danger zone. Fortunately, we have fire hydrants and, during fire season, a fully staffed fire watch tower in the Gila.

All of this helped me understand the increases in insurance costs for my house in Hillsborough.

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 pulled out of the home insurance market due to catastrophic weather events.

In California, 6,000 condominium projects are currently uninsured. Projects in Santa Fe struggle with the same problem.

Increased drought caused by climate change is making parts of our state more prone to wildfires with subsequent flooding. But in New Mexico, the companies haven’t left the market, they’re just refusing to renew home policies in vulnerable locations.

Unaffordable and unaffordable is becoming a common story for homeowners.

In Louisiana, the insurance commissioner said recently, “We would have to be blind and dumb not to recognize climate change as a factor.”

In some cases, when there is no mortgage, homeowners decide they cannot afford the costs and decline coverage. This is especially true for homes passed down through generations in New Mexico. If the house is destroyed, all is lost.

With what’s going on, homeowners are looking for ways to get the best coverage at an affordable price.

Here are some ideas:

  • Pay more attention than ever. Ask questions. I’m shopping;
  • Read the fine print. As premiums increase, make sure your cover is not diluted; and
  • Increase your deductible to an amount you can manage if disaster strikes.

First of all, recognize that climate change is real and learn what you can do to prevent it.

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