Under Mexican law, motorists are required to have insurance, or "proof of financial responsibility", in the event of an accident, even if you are not at fault. As a foreigner traveling in Mexico, the only way of demonstrating this financial responsibility is to have sufficient real currency to cover damages, or an insurance policy from a Mexican company. U.S. or any other non-Mexican insurance does not cover your liability for potential accidents, nor does it fulfill the basic requirement for insurance according to Mexican law.
Regardless of what your U.S. or Canadian insurance company may tell you, their policies are not considered "proof of financial responsibility" under Mexican law. While a few major U.S. insurance companies cover damages to your vehicle in Mexico up to a small distance south of the border (usually no more than 25 miles), they do not cover damages to other parties. This is why any U.S. policy must be accompanied by at least a liability-only policy from a Mexican insurance company.
Read more important points regarding U.S. and Canadian auto insurance policies and how they work (or do not work) in Mexico.
In addition to liability and legal assistance coverage, you have the option to add collision and theft coverage and partial theft and vandalism. Most policies also offer roadside assistance. View our description of coverage for HDI Seguros or ACE Seguros to see what is covered by our policies. You may also like to read our FAQs about Mexican Insurance.
Liability is an obligation to pay money to parties other than yourself or occupants of your vehicle. The liability component of the insurance covers damages which you might cause to other vehicles or property in an accident. It also covers costs for bodily injuries which you might cause to other parties.
For example, while in Mexico you caused a serious highway accident in which you hit and totaled another car, resulting in several injuries needing medical attention. After it was found that you were legally responsible for the accident, you would be required to reimburse the driver and passenger in the car you hit for medical expenses they incurred, plus other expenses as determined by the Mexican court, and the value of their vehicle. The liability component of your insurance policy, be it liability-only or full coverage, would pay for any of these expenses up to the limit on the policy.
Travel advisory about Driving into Mexico published by the County of San Diego: Tips for Travelers Who Drive to Mexico.