Owning real estate in Mexico is a dream for many individuals. The laid back lifestyle, beautiful climate, and delicious food make it an ideal place to own a second home or to enjoy retirement. Part of becoming a homeowner in Mexico is making sure you are protecting your investment accordingly against unforeseen circumstances and catastrophic events. A key preventative measure to keep yourself in a safe position is to consider property insurance. Property insurance in Mexico, which is different from title insurance, has many differences when compared to property insurance in the United States or Canada. Here we will discuss property insurance in Mexico and what you need to know.
Mexican Property Insurance: What to Know
Mexican property insurance offers varying levels of coverage that may be different than what you are used to back home. The policy wording will be different, and some things you may consider standard coverage may not be so in Mexico. In order to help foreigners and provide more comprehensive coverage, many property insurance companies based in the United States have begun offering Mexican property insurance policies that are more similar to US and Canadian policies. Mexican insurance companies underwrite the policies so it is valid under Mexican law. Since real estate is one of the most expensive things people can own during their life, it is important to properly protect your investment against an unforeseen event or natural disaster so you will not risk losing a large sum of money. Let’s discuss a few important questions to consider when you are deciding whether to purchase property insurance from a Mexican insurer or from a specialist property insurance company based in the United States.
U.S. Based Property Insurance Specialists
Unless you are proficient in Spanish and feel comfortable dealing with claims in another language, most expats are recommended to purchase a property insurance policy from a US based insurer that specializes in policies for foreign home ownership in Mexico. This is the best idea because if you ever have to file an insurance claim, it will be much more simple if you are working with a policy in English. Any insurance claim related situations can be stressful no matter how great your policy is, and the added stress of not understanding the wording in Spanish is something you can avoid. In addition, the majority of US based property insurance will have added coverages not available with Mexican insurers. For example, third-party liability coverage is standard for most US based policies, and is usually not available with Mexican insurers or comes with an additional premium. Third-party liability insurance is important to protect you from lawsuits against you in Mexico.
Types of Structures to Insure
As many homes in Mexico are comprised of multiple structures including guest houses, studios and casitas, make sure your property insurance policy covers all structures on the property. In addition to covering the main structure of your home, you may have to add the options to cover all additional buildings on the property so make sure your policy clear states which buildings will be included. Any stand-alone structure is considered an additional building, so make sure that your property insurance policy clear states which buildings on the same property are covered. It is important to recognize that potentially risky structures such as palapa roofs and wood-framed buildings are usually excluded from all policies. If you want to insure those structures as well, be aware you will likely have to pay a high premium to have them included so you will need weigh the pros and cons of potentially leaving those structures out of your policy. Depending on the cost to replace or repair versus the additional cost to include them on your policy, it usually makes sense to leave those structures out of your policy.
Vacation Rental Insurance
Another important thing to consider when looking for property insurance is to consider a renter’s liability coverage if your home doubles as a vacation rental. Especially if you rely on rental income to support your quality of life, you should make sure to include coverage to protect yourself from a loss of use if something happens to your home. This additional coverage will help cover living expenses if your rental becomes damaged and cannot be rented until it is repaired. In general, this type of renters liability coverage is excluded on most standard policies, so make sure you confirm exactly what type of coverage is available prior to purchasing a policy. You may have to pay an additional premium to have the renter’s liability element included, but it is a key consideration for individuals who own and rent out vacation rentals.
In conclusion, when you buy property in Mexico it is important to purchase a property insurance policy that you can both understand, and properly covers your investment. Make sure to carefully check to insure that third-party liability coverage is included, and verify that rental income will be protected if your home is also a vacation rental. Lastly, if you own property that contains multiple dwellings, insure which structures are included and make sure it is clearly stated on your policy.
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