If you are planning a drive to Mexico you might be surprised to learn that your US car policy won’t cover you there. In this blog and podcast we will review what coverages are required in Mexico and some examples of how insurance works there as well.
Planning a Drive to Mexico? Understand Car Insurance Coverages for your Trip
Welcome to insurance talk. My name is Cheri Martin, the Owner of Bancorp Insurance. And here today with me, my special guest is Tammy Lesueur. Not only does she have over 30 years of experience in the insurance industry, but she was Bancorp Insurance top marketer for over 30 years. And she’s my mom, which means she’s really special.
So, recently my mom and dad went down to Mexico, and they didn’t fly. They drove the Baja down, which is about 1500 miles.
They jumped into the car, and it took them a whole week to drive down there, and they had a great time doing it. But one of the things that they came across was does my car insurance work in Mexico and the answer my mom found out was no. So, she’s here today to talk to us a little bit about what she discovered about Mexican car insurance and what you should know if you decide to drive your car down across the border.
Mexican car insurance, I can remember the years that we were in the business, people would always ask, do I have to buy Mexican car insurance? And the answer is definitely yes. And part of the reasons is, is because their laws are different than the United States. The first thing you need to know is your insurance is no good in Mexico. So, if you get into an accident in Mexico with your car and you don’t have Mexico car insurance, you have no insurance, which is scary.
This is why this isn’t so important. The next thing, Mexican liability laws are different than the United States liability laws. We all buy liability insurance for our, in our auto, which basically covers us. If we get into accident, it will pick up medical insurance not just the liability portion. Or, somebody else is in your car gets injured. All of that’s covered under your liability in Mexico.
The liability law is different. So, you really want to buy higher limits than you might have at home. You may have a $300,000 limit at home, but you really want to buy, if you as much liability as you can. In our case, I bought the $500,000 liability limit. And I know I can hear you now saying, well, why would I spend more money? Well, you spend more money because the law is different. And this is how the law works in Mexico.
If you’re in an accident, the Mexican federal liability says your insurance must pay the Mexican state minimum wage multiplied by 5,000. So, let’s say, you’re going down the highway, you get in an accident and somebody’s hurt in the other auto and they determine that it was, you know, you who caused the accident or maybe they aren’t even sure, but you’re in Mexico. The state then can multiply the amount by five times. So, this is how it would work. Let’s say that in Tijuana, the minimum wage is 213 Mexican pesos. They’ll take 5,000 times 213, which will come up to be over a million pesos. But, when you translate that into us dollars, it’s 63,000 US dollars based on the 19 and 85 exchange rates, which is what the current exchange rate is today. Then, the state can multiply that figure by five, which amounts to over $250,000, us dollars per person.
So that if there’s more than one person in the car, they’ll still take up the minimum wage to say, you know, maybe you had a, a father and mother and they both work that you could be hit per person 5,000 times more than a minimum wage in Mexico for the liability. The other thing about your drive to Mexico that you have to keep in mind is when you buy a Mexican insurance policy, and you want to cover your auto physical damage of your car. If something happens to your car, you want to be able to replace the, you know, left fender. If you broke it, or let’s say you backed into a tree. Because, the parking is fun down there.
If you have a fender bender and you want to replace it, but you are going to be back to the states, you know, next week. You don’t want to take the time to have, take your car to a shop down in Mexico and have it repaired. Well, one of the things that, and I I’m into insurance, so I’m kind of a nerd that way. I actually downloaded all the policy language from the policies that are sold to Americans to buy Mexican car insurance and Reddit. There’s a stipulation in every policy that states that they’ll pay for labor at the cost of Mexican labor and Mexican parts, which can be up to 50% less than what it here, here is in the United States. Well, if you have a fender bender, you might decide to drive your car home and have it repaired here.
You can buy an endorsement that gives you the coverage for US labor and US parts. This is something we don’t think about in America because our auto insurance policies covered labor in parts in the United States, but we’re coming out of Mexico. So, they want you to get your car fixed in Mexican, at Mexican labor rates in Mexican part rates, but that might not work for you. So, you it’s worth your time to buy the endorsement. It’s not that expensive where really the endorsement would be less than what you would buy, the difference you would pay to replace the part. One of the other things that you’re going to run into when you do physical damage on your car, on a Mexican auto insurance, when you buy it online, it’s going to pop up and ask you to value your own car, and they tell you to go to blue book. So, I did that. I went to blue book, put year, make, model number, all that into blue book and got the, the make of my car. But I also know, and today a lot of blue book is very low compared to what you would sell that car for on a lot or what you would buy that car for on a lot.
Especially right now, just because auto rates are, they’re still having a shortage of automobiles due to the chip shortages. So yeah. Used cars are worth more than they were even three years ago. So, you kind of need to be aware of that. I also went online and just, you know, looked at my own car to see what would cost me to buy it. If I was going to go buy it off the lot. Once I looked at it to buy it off the lot, then I that’s, you could put whatever number you want in there for physical damage. Then I just put the number in and figured that would be enough to cover my car if I totaled it in Mexico. And so that’s something that you normally don’t do. America either. You, you know, when you’ve rated your car, car insurance, it gives you a number that it’s actual cash value. But when you do it online, you have to come up with a thicker.
The other thing that you have to be aware of for Mexico auto insurance is if you are driving across the border, if you own your car outright, you should have a copy of your title with you in your registration. That’s because there is a ring of theft that steals cars out of the United States sells them down in Mexico and vice versa at the Mexican border. They want toknow that you own your car. If you have a loan on your car, then you, you need to have a loan document that proves that you are own that car, but you’re paying off the loan, because they’re looking again, they’re looking for that. The car is yours, that you’re not just driving it down there to sell it or that you actually own the car. And those are some, those are some of the things that you have to watch for Mexican car insurance is easy to buy online. Basically, you’re buying from the company I bought from was travelers. Although they have a different name for Mexico, you can, there’s about three different companies that deal Mexican car insurance. The you’re actually buying from an agent online and you’re just filling out the paperwork. You want to carry your Mexican car insurance with you because the other thing the Mexican car insurance provides is legal defense for you in Mexico, by a lawyer in Mexico.
So, this would be, if you got in an accident with maybe another individual and the litigation couldn’t be settled, um, and it had to go to court, then you would have an individual represented to you that was Mexican to make sure that you were represented well in court and right. And they know that they know the Mexico legal system and the laws. Yeah. We’re Americans. We don’t necessarily know the legal system in Mexico. Yep. So, you might find yourself thrown in jail and you don’t understand why the company will provide a lawyer for you on when you buy your policy. They actually have a piece of paper that they tell you to keep in your car that has the one 800 number you call for you. Oh, that’s good insurance company. And say, I was in this accident. This is what happened. And then you have someone to represent you and then you can go forward from there.
Do you know if they help with like the claims just from the beginning or is it, I don’t believe they help. It’s just representation. It’s legal representation. The claims, they have a claims number that you would call just like you do here. The states you call the claims number. If you have an accident and then claims representative takes over.
So, but you want to have it in the car with you because if you do get stopped by the federalities, they will ask you if you have Mexico and auto insurance and you have to show them your policy and they can see it. I just made a photocopy of my policy, kept one backup, you know, where we were staying and, and kept the photocopy in the car so that we had it.
That’s a good idea. Yeah.
Because you just that way, you know, fortunately we did not have to use it, but you never know.
Yeah. It’s always better to be prepared.
It’s not cheap when you buy Mexico auto insurance because a lot of people did like we did, we stayed there a month to 30 days. The company obviously doesn’t want to provide you with just 30 days of coverage. They have you buy a full six months and a full premium, fully earned premium upfront for the six months. So, you can’t do a payment plan like per month, like you would normally in the United States, correct? Well, that would make it expensive upfront.
You can buy an annual policy or a six-month policy, but you’re paying for it upfront and makes sense for the insurance company’s point of view. If you think about it, they will have lots of people who only bought it for a month or two months or, or whatever. You can’t really cancel it. It’s not cancelable. If you cancel it, you’re not going to get your premium back. Yeah. It’s fully earned upfront and that’s all, what that’s all fully earned means is it’s theirs. Yep. And as soon as you pay ’em it’s theirs. You’re not getting it back.
Nope. And so that’s one of the things you need to be where, you know, be prepared for obviously there, if you don’t buy the extra endorsement to cover the parts and labor in the us, it’s a little cheaper. If you don’t want to have physical damage on your car covered, it’s a little cheaper. I just bought the whole thing because I figured better safe than sorry. And my is still very drivable. I want to keep it
Did you, so you guys didn’t have any accidents or anything like that when you were down there? We did not have any accidents. Good. We tried real hard not to have accidents, but you know, you’re driving you’re know unfamiliar area. Your unfamiliar cities, you know, people drive a little differently. It’s easier to have accidents just because you’re looking around trying to figure out which way to go.
Well, is there anything else that we should know about Mexican car insurance?
Uh, those are the high points. I would suggest anybody when you, you know, make sure that when you buy your policy, I’d add that parts in labor coverage because that’s an easy one. It doesn’t cost you that much buy your higher liability limits. Not that you’re going to get in an accident, but if you do at least you’ve got proper limits and you’re not going to be looking, you know, to get money out of your pocket to spend to cover their, their wage times 5,000.
Well, thank you very much. This was Tammy Lesueur with all of the knowledge on Mexican car insurance.
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Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our agents.