Homeowners Insurance

When you are looking at how to insure the structure of your property, there are a few different methods that can be used:

Replacement Value: The best way to determine this value is to take the number of square feet (or meters) and multiply that by the cost of construction per square foot (or meter). The other way, which is not as recommended, is to list the price that you paid for the structure.

Market Value: To determine this value, you need a realtor to come to the property and appraise its market value based on many different factors. The insurance companies will not do this for you. The biggest situations where we see this used is when people own a condo unit. Sometimes the homeowner administration board of the condominium will have a master policy on the structure in place, and sometimes they will not. If they do not have a master policy, and the condominium takes major damage, because there was no insurance policy in place, they may decide not to rebuild at an out-of-pocket cost, in which case your unit would not be rebuilt, so it would be better to have market value, so you can buy a similar property in the area.

It is important to note here that we cannot under-insure structures. It is best to list the value at 100%, but in the interest of reducing the premium, we are able to go as low as 70% of the total value. In doing that, we still need to notify the insurance company of what the 100% value is. If we list a value that is anything lower than 70% of the total value, they will consider it under-insured, and you will only be compensated a value which is proportional to the value we insured it at versus the total value.

Property insurance in Mexico is one of the few types of insurance that has co-payments as well as deductibles. Below is a brief example to show you how each of these would be applied to your claim.

For hurricane/severe weather coverage the standard deductible is 2% and the standard copayment is 20%. So, let’s say you insure the structure of your home for 100,000 USD, and it takes some rain and flood damage for 50,000 USD. The deductible is applied to the total value of the structure (100,000 USD), so you would need to pay the first 2,000 USD. That 2,000 USD is subtracted from the amount of damage leaving the new damage total at 48,000 USD. Of that 48,000 USD you pay the 20% copayment, which is 9,600 USD. So in total, you pay 11,600 USD of the damages and the insurance provider pays the remaining 38,400 USD.

The 2 biggest deductibles and copays are the hurricane/severe weather and earthquake/volcanic eruption coverages for the building structure and interior contents. The basic fire and lightning coverage should have no deductible or copay, and neither should the liability. The other smaller coverages may or may not have deductibles or copays, and if they do, they are usually percentages of the total damage

Structure: This section provides coverage to the external, and sometimes internal, structure of your home or condo/apartment unit. It is important not to include the land value when calculating this value.

Contents: This section provides coverage for ALL contents and personal belongings within the unit. This includes A/C units, kitchen appliances, electronics, furniture, clothes, etc.

Third-Party Liability: A minimum amount of liability coverage is required on all property insurance policies. It is usually rather inexpensive at about 10 USD for every 100,000 USD in coverage. This provides coverage in case any third party may come on your property and get injured and try to take legal action against you. Especially in condo units it is also important to make sure this coverage includes “Cross Liability”. This provides coverage in case something originating in your unit causes damage to the surrounding units. The most common example is a water leak. If you are a renter, it is also important to ask for “Renter’s Liability” so you are protected against any damage you may do to the property you are staying in.

Outdoor Constructions: The values of any outdoor constructions on the property need to be accounted for separately, and should not be included in the structure section value. This includes pools, palapas, casitas, retaining walls, etc. as well as things that may be attached to the main structure, such as solar panels, terraces, patios, etc. To provide coverage for all items we need a list of each item and its corresponding individual value.

Severe Weather/Hurricane: The three above coverages have the option to have this coverage included or excluded on the policy. In some areas of Mexico, this coverage may not be offered to properties within a certain distance of water, or it will not be offered during hurricane season. It is important to remember that this is not JUST hurricane coverage, but it also includes damage from wind, rain, flooding, mudslides, etc. This coverage usually makes up a bulk of the policy premium.

Earthquake/Volcanic Eruption: Similar to the severe weather coverage, this coverage can be either included or excluded for the structure, contents and outdoor construction sections.

Betterments and Improvements: This coverage applies to condo units more than anything. If you buy a unit and then do any remodeling or make any upgrades, these costs, and increase in value, need to be accounted for in this section. This includes things like new cabinets, new flooring, new countertops, etc.

Extra Living Expenses/Loss of Rental Income: This coverage will take effect if you are not able to live on your property, or rent it out, due to damages or repairs to damages covered by the policy. Generally we can place an amount for either 3, 4 or 6 months, and we need to specify which. For the extra living expenses, hotel and other accommodation receipts will be required in order for the company to reimburse you. For the loss of rental income you will need to provide proof the property was being rented (rental agreement), or proof that had it not been damaged it would likely have been rented out during that time (past rental history).

Glass Breakage: Any major damage to exterior windows and doors is generally covered under the overall structure section mentioned above. This separate glass section provides coverage for two other things. The first is minor damage to exterior windows or doors. So for example, a coconut falls through a window, or a kid throws a rock through a window. Usually when just 1 pane of glass is damaged. The second is interior glass. Most commonly this is shower doors and enclosures, but can also include any large mirrors, glass banisters or railings, etc. This coverage, along with the severe weather and earthquake coverages, are usually the three most expensive on any property policy.

Power Surge: Your electronics are covered against any major damages in the general contents section mentioned above, except power surges. This coverage is usually very in expensive and well worth it. It is important to include A/C units, kitchen appliances, washer/dryer, TVs and other electronics, etc.

Theft of Contents: The general contents section above covers damages. This section covers theft. It is generally recommended to put a value of about 10-20% of what you listed in the general contents section, as it is unlikely all of your belongings will not be stolen. It is important to make sure this coverage is not limited to “forced-entry” theft. That means that if your belongings are stolen and there is no sign of a forced entry, you would not be covered. So if they came in through an open window or your door was left unlocked.

Cash and Valuable Documents: This section is a sub-limit of theft of contents, so its value can never exceed the theft of contents value. This is to cover small amounts of cash (up to 10,000 USD), and any valuable documents that may be kept on the property at a given time.

Artwork/Jewelry/Collectibles/Memorabilia: This section is a sub-limit of theft of contents, so its value can never exceed the theft of contents value. For these items to be covered by the policy, at the time it is issued we need appraisals, descriptions, and photographs of each item.