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PURCHASING INSURANCE FOR MEXICO

By Jim Labelle, CEO, www.mexpro.com

For over 25 years we have had the opportunity to help tourists, property owners, and businesspersons who drive, own homes, or operate businesses or subsidiaries in Mexico to properly protect their assets south of the border. It is ironic that most of us purchase our insurance coverage in the US with great care, yet use a lesser standard of care when purchasing coverage for Mexico.

This article includes a very important update regarding the 2013 change to Mexico Liability Laws.

When purchasing any type of insurance for Mexico, buyers should analyze a number of issues including:

1.  Are the US Broker and Mexican Insurer they represent reputable and in sound financial condition?

2.  Do I need to purchase coverage from a Mexican Insurer? 

3.  What are the differences between a US and Mexico Insurance policy?

4.   What type of insurance do I need, and at what limits?

Is the U.S. Broker Reputable?

Hundreds of  U.S. insurance agents and brokers offer insurance for Mexico. Logically, a great number of these agents are located close to the border. Some of the important distinctions to keep in mind when choosing an agent or broker are:

Does the agent have experience in the Mexico market and does the agent have experience in the US market? It is important that the agent you work with has a vast knowledge of the difference between US and Mexico insurance and can counsel you regarding the potential gaps in coverage among these policies. Purchasers of insurance for Mexico should have confidence that they will receive professional, knowledgeable service when they need the coverage to respond or in the event of a coverage dispute.

Most reputable insurance agents carry Errors and Omissions insurance to protect themselves, and their customers, when legitimate mistakes are made. Ask your agent if he or she carries Errors and Omissions insurance; it will protect both you and your agent in the event of a coverage dispute.

Is the Mexican Insurance Company Reputable?

As the global economic environment continues in a state of uncertainty, it may be more important than ever to purchase insurance for Mexico from a financially strong insurer. No matter how reputable your agent or broker, if they are placing your insurance with a troubled insurer you could be in for some unpleasant surprises in the event of a claim. There are over 50 insurance companies in Mexico; similar to the U.S., "some are good and some are bad".

Although some US insurers have purchased ownership interests in Mexican Companies, these Mexican companies operate independently of the US parent company.   Consumers in the US or Canada would never buy insurance from a company that is not A-rated, yet many in Mexico unknowingly  buy from unrated or vulnerable insurers who do not carry an A- rating.  To check if an insurer in Mexico is A-rated, or has an A-rated parent,  visit www.ambest.com.

In the event of further economic problems and/or the devaluation of the Peso coupled with a few natural disasters such as a hurricane or flood, how will the insurer fare? (for a list of Mexico insurers ranked by written premium, please feel free to call our office at 1-888-INS-4-MEX.)

Why do I need to purchase coverage from a Mexican insurer?

Mexico law mandates that only insurance companies which are licensed and admitted in Mexico can provide "civil liability" coverage that is recognized by the judicial system of Mexico. Although a few US insurance companies will extend physical damage coverage (collision, comprehensive) on your auto while you are driving in Mexico, they cannot and do not provide Mexican liability.

Similarly, Mexican law requires that any property located in Mexico be insured by an authorized, admitted Mexican company. Some US companies will extend Property coverage to large commercial projects in Mexico; however, for both homeowners and commercial property owners both the underlying "fire" coverage and the Mexican liability coverage must be purchased from a Mexican insurer.

What are the differences between USA and Mexican coverages, and what type of insurance and what limits do I need?

There are some tremendous coverage differences between US and Mexican Insurance policies, and far too many "minor" differences to list here. Following are some of the major differences outlined by type of insurance.

LIABILITY INSURANCE- Liability in Mexico (liability coverage is a part of all homeowners, auto, commercial property policies, etc.) is determined by Civil Law, and is based on limits defined by Mexican Statute. Depending on your view of things, this is either a brilliant system or an antiquated one. I like it. Claims for pain and suffering and emotional distress are virtually unheard of and claims for Property Damage to Others and Bodily Injury to Others are settled on an "actual loss" basis, guided by Statute.

In 2013, the potential damage limits for a negligent accident causing a fatality have increased substantially.

Prior to 2013, liability limits and claims exceeding $ 100,000 were quite rare.  However, in 2013 the Mexican Government has increased the potential award limit for damages for negligent death from 750 days multiplied by the daily minimum wage (approximately $ 50,000 US)  to 5,000 days (approximately $300,000 US) in most Mexican states.

Purchasers of Mexico Auto Liability insurance are now advised to use the same level of care when choosing liability limits as they do in the USA or Canada, as potential damage awards for causing a negligent are now similar in the USA, Canada, and Mexico.

Keep in mind that the liability insurance you purchase from a Mexican insurer will not respond to claims or suits brought against you in the United States or Canada for an "incident" which occurred in Mexico. All liability claims under a Mexican insurance policy must be brought and adjudicated in Mexico for coverage to respond.

AUTOMOBILE INSURANCE- Automobile Insurance rates, coverages, limits and deductibles vary greatly among Mexican companies. Some important items to look for are:

• Does the insurer offer adequate liability limits, or does the policy reduce the amount payable by using split limits?  Split limits reduce the amount available for "Property Damage to others". We advise all our customers to purchase at least $ 300,000 US Combined Single Limit liability coverage.  Beware split limits of $ 40/80/40, for example.

• Does the insurer automatically include Legal Aid and Travel Assistance?  These "additional" coverages should be included in every policy. They will help you tremendously in the event of an accident. Without them, you could be on your own racking up legal bills and huge headaches until your liability has been determined.

• What are the Physical Damage coverages and deductibles?

Mexico insurance policies provide collision coverage, and theft coverage, much like in the USA and Canada.  Some offer fixed deductibles, which are much better than percentage of the vehicle deductibles.  Some offer partial theft and vandalism, some exclude this coverage.  For a detailed list of coverages, please obtain a quote on www.mexpro.com.

As you can see from this brief summary, insurance in Mexico is just as complex as it is in the US. Although all types of insurance are available in Mexico, coverages, terms and conditions vary greatly among insurers. For a free, no obligation coverage analysis and quotation for Auto, Home, or Watercraftl insurance in Mexico, please contact Mexico Insurance Professionals at 1-888-INS-4-MEX or visit our website at www.mexpro.com.

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