PURCHASING INSURANCE FOR MEXICO

By Jim Labelle, Mexico Real Estate and Travel Magazine

For over 15 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.

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?

Over 100 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".

According to the 2002 report of the Mexican Insurance Commission (Comision Nacional de Seguros y Fianzas) only 2 Mexican Insurance companies write over $400 Million US in non-life premium (life insurance excluded). These companies are Grupo Nacional Provincial and Seguros Comercial America. The next three largest companies write between $ 100 million US and $ 200 million US in premium. Each of the remaining insurers writes less than $ 70 million in premium, (with quite a few writing less that $ 10 million) including some companies quite familiar to purchasers of Mexico Insurance.

Although some US insurers have purchased ownership interests in Mexican Companies, these Mexican companies operate independently of the US parent company.

Ask your agent about the size and financial strength of the Insurance companies they use; 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 us 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.

HOMEOWNERS and COMMERCIAL PROPERTY- While some Mexican companies offer "all risk" policies and reasonable deductibles, others offer only "named perils" policies with some strange deductible and coinsurance clauses. Unlike US property insurance, coinsurance in Mexico is a "share in the loss" penalty applied after the deductible has been met. A coinsurance clause could effectively increase your deductible to 10% to 20% (or more) of the property value.

Check your policy carefully. The same insurance company may offer all types of options, ranging from "All Risk" with no coinsurance (the good) to "Named Perils" with a coinsurance clause (the bad) to, well, we won't get into the ugly.

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.

Personal Injury lawyers, as we know and love them in the US, do not exist in Mexico. Therefore, liability limits and claims exceeding $ 100,000 are rare. It is far more likely to have a "Property Damage to Others" liability claim that approaches this limit (damaging someone else's new Chevy Suburban, valued at $ 55,000, for instance) than it is to have a "Bodily Injury to Others" liability claim that approaches this limit (damaging the occupants of the Suburban, for instance). This is almost an exact opposite of how claims are settled in the US.

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". An ideal limit of insurance on a Mexican Auto policy is $ 100,000 Combined Single Limit. 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?

The main exclusions on a Mexican auto policy are Vandalism and Partial Theft.

The policy is written on a "named perils" basis which includes coverage for Collision, certain Meteorological Events, Total Theft, Fire, and other perils. Deductibles are generally a percentage of the value of the insured vehicle.

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 either Personal or Commercial insurance in Mexico, please contact Mexico Insurance Professionals at 1-888-INS-4-MEX or e-mail us via our website at www.MexPro.com.

Jim Labelle earned the Certified Insurance Counselor designation, a distinction held by less than 1% of all US insurance professionals, in 1995. Jim has been involved in the US and Mexican Insurance markets for over 15 years. Formerly a manager with one of the world's largest insurance brokerages, Jim, his wife Andrea, and their sons, Jimmy and Mathew, live in Flagstaff, Arizona. Jim, who works in the Commercial Mexico unit, and Andrea, who works in the Personal Mexico unit, travel to Mexico often to visit colleagues at Mexico's largest insurance companies. Mexico Insurance Professionals is a subsidiary of International Insurance Group, Inc. Mexico Insurance Professionals, which represents Mexico's largest and most respected insurers, has a dedicated staff of licensed agents offering both Personal and Commercial Insurance for Mexico and the United States to policyholders throughout North America. Mexico Insurance Professionals can be reached at 1-888-INS-4-MEX or via their website at www.MexPro.com.