A common question in our business is, what is American Insurance Compared to Mexican Insurance? When comparing insurance in the United States to Mexican Insurance, there are many differences. If you are a tourist venturing into Mexico in your tourist vehicle, understand these facts. Do not let the ease of that border crossing fool you. The differences between U.S. and Mexican Insurance is not as simple as it may seem.
Once you cross the U.S./Mexico border, you are officially on foreign soil. That means you are subject to the laws of the Mexican government. This includes regulations involving parking, speed limits, and other traffic issues. The following article should help you understand the differences.
What is Insurance?
Before we can start to compare, let’s define insurance. Insurance is a risk management contract between you (the party) for a particular risk. Let’s use auto insurance in this example, the risk is that you look down at your cell phone and run through a red light and cause an accident. When you purchase insurance, you transfer that risk to an insurance company in exchange for monetary compensation, or “premium.” Basically, you pay a company to accept the risk that you cause an accident. When the company accepts the risk, it becomes the basis of your insurance policy between you, the insured, and the insurance company.
American Insurance Compared to Mexican Insurance: Regulations Differences
Every nation must have a body for regulating the insurance industry. In Mexico, the insurance and reinsurance industry is under the State Ministry of the Treasury and Public Credit (SHCP). The federal, national insurance and bonding commission within the ministry licenses and supervises the activities of insurance companies.
In the United States, the industry is regulated by the individual states since the U.S. is a federal government. The State departments enforce regulatory laws through regulations, rules, and laws enacted by their state legislatures. There are no national laws or body that regulates the industry. However, federal laws and courts play a role in the adjudication of insurance matters.
In the U.S., insurance prices are tightly controlled, and they are regulated at State Levels. Each of the 50 states in the United States has a Department of Insurance, with its own elected commissioner. Mexico, on the other hand, regulates insurance at the federal level. Some Mexican auto insurance is very good, comparable to, or even superior to, what you have back home. Some policies are poorer in quality, and others are downright terrible.
The best way to tell the difference is to do your homework. A trip to Mexico, at least in your car, should not be a spur-of-the-moment decision. If you have time to plan your adventure, you have time to research Mexican auto insurance.
Another significant difference between U.S. and Mexican Car Insurance is the fault assessment and assignment as it relates to claims.
In the U.S. each state has different rules related to minimum coverage and at-fault regulations. Michigan, for example, is a no-fault state. So regardless of fault, your insurance policy covers damage to your car.
In Mexico – all of Mexico is no-fault. So, essentially “uninsured motorist” coverage does not exist. If you have a complete coverage Mexican car insurance policy, the collision risk will pay for damages to your vehicle, regardless of fault.
American Insurance Compared to Mexican Insurance: Compared
Mexico laws do not allow foreign, unauthorized insurance companies to carry or issue insurance coverage in Mexico. Hence, your United States insurance coverage becomes invalid upon entry into Mexico. There are a couple of exceptions, for example, 21st Century Insurance. They will extend Theft and Collision within 20 miles of the border. However, be careful because most U.S. company’s that 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, especially from insurance companies that also operate in the United States. Even more impressive is Canada and the United States – these two countries have an agreement. U.S. Drivers Licenses are accepted in Canada, as well as U.S. Insurance, and this agreement is reciprocal.
Cost of Insurance in Mexico vs. the United States/Canada
In Mexico, you will find both public, employer-provided, and private health insurance. Mexican Auto Insurance is private. The largest Mexican Health insurance provider is the public health system (Federal Government of Mexico). The Mexican government comprises of social security organizations providing for employed citizens of Mexico. Therefore, a small percentage of the population funds their health insurance from their own pockets. Meanwhile, the working class and the expatriates go for private insurance. Mexico has a public health care system.
In the USA, the public programs that exist are for low-income families or elderly individuals, disabled, and non-citizens. Usually, everyone else obtains their health insurance privately, or through their employers. However, insurance companies may require you to co-pay and co-insure. There is no national health insurance plan. These variances between the two countries make health insurance much more affordable in Mexico. Another significant difference is in the USA doctors must carry hefty E&O coverage, which protects them against lawsuits. In Mexico, these types of lawsuits are almost nonexistent, which helps keep costs down.
It is worth noting that insurance policies between the two countries differ significantly, especially where it comes to cost, coverage, and regulations.
These differences are fundamental to insurance firms wishing to operate in either country and act as guidelines. Americans will continue to Mexican hospitals as long as insurance remains out of reach in the U.S.
Now, let’s look at the difference in Auto Insurance between the two countries.
American Car Insurance Rating Compared to Mexican Car Insurance Rating
United States rating factors
In the United States, insurance companies have a massive database and they know EVERYTHING about you. The calculation takes into account your years of driving experience. They give discounts for where you live, where you park the car at night. They give discounts if you are a professional, and they know your driving history. More examples of rating factors in the United States include:
- Where we work
- How long we work there
- Our educational background
- Background of our parents
- How long we’ve been driving
- How long has it been since we had an accident?
- Have we ever had a DUI?
- It continues!
In the USA, underwriting is nothing but a mathematical equation.
USA Insurance Key Factors:
- The driver is rated based on education, age, experience, profession, accident history, and vehicle and location
- Cancellation and modifications happen with pro-rate at any time
Mexico rating Factors
In Mexico, this is not the case. For the auto insurance policy, only the car value and location matter in Mexico Insurance. Also, they offset their risk by making these policies earn very quickly (30 days and annual policy have no refund). In Mexico, it’s the car that gets insured; in the USA, it’s the driver.
As such, because there is not a personal rating factor – the terms are more rigid. As an example, daily policies cannot cancel after they start. The same strict guideline applies to annual and semi-annual policies, you cannot cancel after 34 days. Pro-rating that exists in the United States, does not exist in Mexico. If you sell your car 6 months into a 1-year policy – you transfer the policy to the new owner but there is no discount or refund.
Mexico 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.”
If you cross the border from the United States or Canada it is important to recognize the differences in insurance rules and regulations because you must carry both, at least for a time. IF you are only going to Mexico for a short period of time, it makes sense to purchase a short-term Mexican insurance policy. But if you plan to drive in Mexico for more than six months, it might make sense to file an affidavit of non-operation in your state, so that the insurance requirement is waived to maintain registration. This way you are not paying for duplicate insurance. No matter what, you must carry at least liability insurance when you cross into Mexico.
For more information on Mexico Insurance products available click on the links below:
- Mexican Auto Insurance
- Mexican RV Insurance
- Northbound Insurance
- Drivers License Liability Insurance
- Motorcycle Insurance
- Homeowners in Mexico
MexInsurance® since 2003