Protecting Your Mexico Real Estate Investment through Property Insurance

Many people are aware of the high investment potential to be found in Mexico real estate, whether in buying a home or condo, or investing in land to …

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Many people are aware of the high investment potential to be found in Mexico real estate, whether in buying a home or condo, or investing in land to build on. For some people it is a dream come-true in terms of a vacation or retirement property, for others it is a solid investment in an emerging economy and one of the world’s strongest growing tourism industries. For others it is all of the above.

In all cases, it is a very important investment, and it is equally important to protect this investment through homeowners and property insurance. One of the difficulties has been that it is not always easy to find a policy in Mexico that offers the full protection needed for such a valuable investment. Recently, more options have become available, but property owners still need to make some important considerations.   The following are points owners should keep in mind. 

1. Use the Same Standards as Back Home

This seems like a no-brainer, but as in the searching/purchasing process for Mexico real estate, it’s surprising how many investors settle for inferior insurance coverage for their property in Mexico that they wouldn’t even imagine accepting back home in the U.S. or Canada. “It’s Mexico, after all – things are different, right?”

It is a serious mistake to start off thinking this way, and it can lead to other very costly results in the long run. Simply because Mexico is a different country, the law and business culture works differently and things are often not as clear cut as back home, it is all that much more reason for owners to protect their investment through a quality insurance policy.
It has become more common for American Managing General Agents to offer US/Canadian style insurance for those who own real estate in Mexico. If owners focus on gaining a good Mexico homeowner’s insurance policy as you would back home, they will avoid the most common and most costly mistakes.
2. Know the Differences Between Property Insurance in Mexico and North America

Up until recently, there was little selection in property insurance in Mexico, which was only offered through local insurers.   This made it more difficult for owners who didn’t want to settle for inferior policies. Policies did not offer good coverage and were overpriced. A growing option which buyers can consider is more thorough policies offered by U.S. companies for homes in Mexico, which offer better coverage, lower rates and lower deductibles.

3. Include Renter’s Insurance

Many who buy a property as a pure investment in Mexico will be gaining income through rentals, especially in the tourist areas along the coast. This is also true of many retirees and vacationers who rent out their property to other vacationers when they are not using the property to help cover some expenses. While there are other side benefits to renting out, like having someone present and taking care of the property, in all cases, the main purpose of rental is clear – to enjoy an income on a property.

Not having suitable renter’s insurance can put the owner at risk of liability, possibly causing expenses that greatly reduce the profitability of the rental. If an owner takes the risk of renting out without insurance, they are taking the risk that their rentals will become a loss rather than a gain.

The reason is if a tenant is injured on the premise, the owner can be sued and held responsible for medical and other costs.
Renter’s insurance protects owners against this risk by offering coverage for such cases, covering any expenses incurred from liability.
4. Include Earthquake and Hurricane Coverage

There are parts of Mexico where geologically activity is common. While it’s rare that there is major damage caused by earthquakes, earthquakes are common along the country’s numerous fault lines; even relatively minor damage (as far as earthquakes go) can be very costly on a home. Buyers should be sure to check if the area they are buying is near a fault line and how common earthquakes are, and to include earthquake insurance if they are in an active area.

A more common consideration for most expats investing in Mexico is hurricanes along the Pacific Coast and Caribbean. Again, while most hurricanes come and go without event, there’s no reason to take the risk of loss when a buyer can include hurricane insurance in their policy. With the changes taking place in the market recently, policies are available with low fees and deductibles.
 
5. Insure Electronic Equipment

 Electronic equipment tends to have fairly high value, and items such as computers, stereo sets and nice cameras are common for expats living in Mexico. Replacing these can be expensive if they are not covered. The same is true of other expensive and potentially sensitive household items. Owners should to check what coverage is offered in their plan, and what the exclusions there are. They could also consider coverage from U.S. based brokers in which coverage for electronics is usually standard.

6. Investigate Condo Insurance

Condos in Mexico are a favorite for North Americans, whether they are investors, retirees or vacationers. Hands-off ownership, on-site property management, pre-construction discounts and good amenities in the complexes make condos an easier investment for many. Condo complexes usually include a general insurance that covers the structure and common areas. Yet these do not usually include coverage for personal items or rental liability. If these items are not covered, owners should get more complete coverage to “fill in the gaps” for the same reasons mentioned above.

Considering these points and ensuring that key items are covered in a policy will protect buyers against costly losses that can turn a profitable investment into a significant loss. Real estate in Mexico offers excellent investment potential, and with proper insurance coverage, owners can protect the funds invested and minimize these unnecessary risks.
TOPMexicoRealEstate.com; Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely

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