Difference Between the U.S. and Mexican Auto Insurance

More and more retirees heading south of the border to live more comfortably in Mexico. They are wise to keep their U.S. registered vehicle, and Drivers License. Now they need to learn the subtle differences, like their Mexican Auto Insurance. Is it better or worse than Allstate or Farmers and what’s the difference? Why so much cheaper?

Insurance is a contract between you and the insurance company that transfers a particular risk in exchange for premium ($)

-Definition of Insurance

Insurance Regulations

Mexico: the insurance industry is under the State Ministry of the Treasury and Public Credit (SHCP).  Therefore, the Mexican Federal government regulates Mexico insurance.

The United States: regulation at the State level. As such, each State elects a Commissioner, and regulation is at that state level.

Mexican Insurance Cross-Border Coverage

Mexico laws do not permit outside insurance companies to issue insurance in Mexico. So, U.S. and Canadian insurance is INVALID. Therefore, your United States insurance coverage becomes invalid upon entry into Mexico. 

There are a couple of exceptions. For example, theft and collision coverage extended to a certain distance of the border. This sounds nice, but it doesn’t work very well. As a result, we suggest you quote the difference it might be worth it to get full coverage (as opposed to Liability Only).  However, be careful because most U.S. company’s who offer this limited coverage, are stopping the practice altogether.  

When it comes to the United States, this is the opposite. A medical plan from abroad is generally acceptable.  Even more impressive is Canada and the United States – these two countries have an agreement. As such, Canada will accept U.S. drivers licenses and U.S. insurance. Incredibly, this binational agreement is reciprocal.  

Now, let’s look at the difference in Auto Insurance between the two countries.

USA Car Insurance Rating

In the USA insurance companies know EVERYTHING about us.  For example:

  • What company we work for
  • How long in our current capacity
  • What degree and college we attend
  • Parents background and status
  • DUI experience
  • Criminal experience
  • Accident history
  • It continues! 

In the USA, underwriting is nothing but a mathematical equation.

USA Insurance Key Factors:

  • Rating is based on education, age, experience, profession, accident history, and vehicle and location
  • Cancellation and modifications happen with pro-rate at any time

Mexican Insurance Rating –

In Mexico, this is not the case. Mexico knows ALMOST NOTHING about you. For example, only the car value and location matter in Mexican auto insurance. Also, they offset their risk by making these policies earn very quickly (30 days and annual policy have no refund). As a result, in Mexico they rate the vehicle; in the USA, it’s the driver.

Mexican Insurance Key Differences:

  • Rate the car, not the driver
  • Rate the location traveling in Mexico
  • Quickly earned period (30-34 days) no such thing as “pro-rate.”

Keep in mind with Mexican insurance, these are not cancellable after the “earned” period. Also, daily policies can’t be canceled once they start and semi and annual policies are fully earned at 34 days.

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