Property insurance in Mexico
When you own property in Mexico, especially a home, it’s important to consider how you will insure your asset against unforeseen circumstances and catastrophic events. Note that property insurance is distinct from property title insurance. Property insurance coverages are paid annually and underwrite the physical property on the land and your personal possessions inside of it; title insurance is a one-time insurance payment you can buy when you purchase a property that mitigates risks related to unforeseen issues or liens associated with the property’s title. Property insurance policies in Mexico are different to policies sold in the U.S. and Canada. The policy wording is different, and the types of coverages offered are different, so some things that you might think are included as standard, might not be if you purchase your insurance in Mexico directly from a Mexican insurer. To bridge this gap, specialist companies based in the U.S. have developed property ownership insurance coverages which reflect the wording, terms, and coverages typically included on US and Canadian policies. The insurance itself is underwritten by Mexican insurance companies (by law, it must be this way), but the U.S. companies work in partnership with Mexican underwriters to create a product that is familiar to those purchasing insurance in the US and Canada (or those who want a US-style policy), and which is legally valid under Mexican law. A house (or watercraft) is usually the most valuable physical asset people own during the course their lifetime. It’s possible to lose a fortune (and even a life’s savings) if you are not insured or discover following an unforeseen event or natural disaster that your policy was not adequate or that the insurer underwriting the policy was not financially sound. Some homeowners in Mexico purchase property insurance from a Mexican insurer direct that charges premiums in Mexican pesos and pays out in Mexican pesos; others purchase from a specialist US-based company that offers US style insurance with premiums in US dollars and pay outs in US dollars. This guide highlights some of the key questions you need to ask, and key aspects of property insurance that you need to consider as you prepare to insure your home in Mexico.
Homeowner’s insurance in Mexico
Should you buy your insurance from a local Mexican broker or a specialized US firm?
Buying from a Mexican broker
When you buy home insurance from a Mexican broker you will typically:
obtain coverages sold with Mexican-style terms and characteristics, often different to those offered in the US and Canada and which may offer less coverages or have limitations you are not accustomed to
policy wording in Spanish, so you will need to be able to read Spanish fluently or have someone translate and/or explain the policy to you
claims and any discussions about claims will need to file and argue any disputes in Spanish; you will need to get an interpreter to deal with claims if your Spanish is not that good
pay premiums in Mexican pesos and any claims will be paid out in Mexican pesos
Buying from a specialist US firm
When you buy home insurance from a specialist US firm you will typically:
obtain coverages sold with US-style terms with the same kinds of characterizes you see on insurance policies offered in the US and Canada
policy sold and worded in English
claims and discussions about claims can be conducted in English
premiums paid in US dollars with any claims paid out in US dollars
Mexican or US policy?
If your Spanish is good, you have a decent local insurance broker contact, and you’re satisfied with the coverages offered by a Mexican-style insurance policy, then a local insurance policy will suffice, although there’s no harm checking the products offered by US based policies.
We recommend that you consider the services of US-based specialists set-up specifically to service foreign-home ownership in Mexico if your Spanish is not fluent and if you don’t have much experience of buying insurance in Mexico.
It’s also important to consider that, in the event you need to claim, you will find yourself in a stressful situation, and having an insurer that has issued a policy in English and in terms you are familiar with and covering events which you are used to seeing covered in an insurance product will be worth any additional premium on the day you may need to make that telephone call to file a claim.
Further, US-led policies can include coverages (for example, third-party liability cover) as standard, whereas many Mexican policies do not cover these without them being specifically scheduled, and with significant additional premiums.
Property title deed
To buy insurance that will cover structural damage to the physical property, you will need to hold legal title to the property or have a mortgage that leads to legal title. If you purchase land or property in Mexico that is passed to you on Agrarian land terms, then you cannot purchase insurance to protect the buildings on it. Learn more about legal title vs land possession.
Important note on “Simultaneous Occupancy” when renting
If you rent part of your home (e.g., a room, or an outbuilding) to third parties while you are living on the property —known as ‘simultaneous occupancy’ in insurance terms— this is treated differently by insurance companies and a personal/domestic policy will not cover you: you’ll need to seek out a commercial policy which is likely to be more expensive. The reason is that simultaneous occupancy where a commercial arrangement exists creates additional risks (e.g., lawsuits) which a domestic policy does not price into the risk premium.
If, on the other hand, you rent the entire property and vacate the property while the renters are present, then a personal/domestic policy will suffice.
Elements of home insurance coverages
Depending on your needs, circumstances, and budget, you can insure your property entirely or partially. The premium costs will depend on many factors including the location and type of your property, its age and value, and what events you want coverage for.
Note that certain structures, especially risky ones like wood-framed buildings and palapa (palm or straw) roofing structures are usually explicitly excluded from all policies; if you must insure these, be prepared to pay a high premium to have them included in your coverages (it’s usually uneconomic to do so).
“All Risks” —vs— “Named Perils”
Some policies will offer “All Risks” cover, a form of comprehensive coverage that will pay out in the event of most incidents involving your home. The better policies offer the option to cover catastrophic incidents such as hurricanes, floods, wind, fire, volcanic eruptions, and earthquakes; surprisingly, some Mexican insurers are unable to underwrite some of these events.
To lower the premiums, you can elect to limit certain “Named Perils” assigned to your policy instead of taking All Risks coverage; in this case, certain events will be covered while others will not. Cheaper policies are often the “named perils” type—even though on the surface they might appear to be comprehensive. A good broker will make a clear distinction between these two during its sales offer and demonstrate the cover and price differences between options.
Coverages for dwellings
Your policy should cover the main structure of your house. Optionally, you may also cover carports, guesthouses, and other outbuildings including garages, games rooms, cabañas, equipment rooms, studios, etc. Some homes in Mexico are composed of several structures (for example, several buildings situated around a central courtyard) and in these circumstances, the insurance rule is usually: everything that is directly connected is treated as one building. Anything that stands-alone is considered an additional building.
Personal goods on the property
A good insurance policy will cover personal goods owned by you, your guests, or domestic employees when they are working at your residence. Some policies also include coverage for certain valuable property, such as cash, securities, jewelry, fine arts, sporting equipment and property used for business purposes—up to certain limits. If you need higher limits for specific items of property that you own, this option is available by listing them on a special section of the application, which is type of ‘named risks.’ Theft coverage varies, depending on whether it is “scheduled” (specifically listed) or not.
Third party liability
Good homeowner policies provide coverage for your personal liabilities to third parties to protect you and your family against any lawsuits or demands presented against you in Mexico. For example, if a wall collapses and injures someone who was near it at the time, such as your cleaning lady; or the neighbor’s property is damaged due to a falling tree from your garden, your insurance policy should cover your liability in these circumstances.
Loss of use or rental income
If you rely on your property for work, or to bring in a rental income, you may also choose to include a “loss of use” risk in your policy. This cover provides for additional living expenses if your house is damaged and cannot be lived in for a time while it’s repaired or rebuilt and, if the option is taken for the loss of rental income, you will be covered for any loss of rental income due to your home not being available for rental to others (you will need to provide evidence that a rental contract exists).
Rent liability coverage
Some homeowner’s insurance policies exclude coverage when your home is rented (even occasionally or part time) or add a hefty supplement to the policy’s premium to include renter’s liability as part of the coverage. If you rent your home (or intend to at some point) and need this coverage, check with the provider you get a quote from to see if renter’s liability coverage is included, or how much more you need to pay in premium to include it.
Insuring your condominium in Mexico
Condominium associations in Mexico are supposed to keep a blanket commercial policy in place to cover the entire property. Typically, this provides insurance coverage for the building as well as communal elements of the property such as pools, garages, the interior walls, fixtures, fittings, and outbuildings associated with the edifice.
These commercial insurance policies tend to be very limiting in what they will cover within the terms of a condominium insurance policy: many Mexican-issued insurance policies exclude third party liability and renter’s liability from the standard policy and charge a substantial premium to include these as optional extras. This places an obligation on condominium owners to cover elements not included by the commercial policy on a unit-by-unit basis.
Don’t be lured into a false sense of security by condominium blanket coverages: in a situation where an event that happens in your condominium affects an adjacent condominium —for example, a water leak in your shower room that damages your neighbor’s room below— you will be made liable for repairs to yours and your neighbors’ damages. Having a personal insurance program in place will protect you from these sorts of events.
The key documents to check on your Condo contracts are the ‘Bylaws’ and ‘Covenants’ associated with your condominium property: these are the documents that contain the small print regarding what is and what is not covered by the condominium building’s ‘blanket’ insurance program.
Beachfront and waterside property insurance in Mexico
It’s possible to insure property near oceans, rivers, and lakes, although premiums may be higher to reflect the additional risks which may arise from storms and flooding in these areas. The insurance application form will ask for the Mexican postal code (zip code) of the property, and this is mapped to detailed topographical and statistical data which enable insurers to assess the hydro and meteorological risks that may present themselves to the property they are being asked to quote insurance for. Some companies may refuse to insure properties close to the sea or other bodies of water, although policies are available that will cover these circumstances, so shop around for options.
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