Determining Your Mexico Home Owners Insurance Limit
Cost of Construction in Mexico
The average construction cost for a custom home built in Mexico is typically somewhere around $60.00 per square foot. However, a very basic dwelling might be built in Mexico for as little as $30.00 per square foot, or possibly less. The cost to build a luxury home in Mexico could be as much as $100.00 per square foot, or even more. Construction costs in Mexico can vary a great deal depending on the location of a dwelling. Construction costs can sometimes also be affected by the ease of access to building materials, as well as the availability of a qualified work force to perform the required labor.
Settlement Options for Mexico Home Owners Insurance
When purchasing insurance for a dwelling in Mexico, one must decide which loss settlement option they would like to use for their policy. The Replacement Cost settlement option is usually the best one, since it is designed to cover the cost to repair or replace an insured dwelling, without making any deductions for depreciation. The Actual Cash Value settlement option is also designed to cover the cost to repair or replace, but only up to the current market value, meaning depreciation will reduce the maximum amount the policy will pay out after a loss. A simplified way to describe these two common settlement options is as follows:
- Replacement Cost: pays to repair/replace Old with New
- Actual Cash Value: pays to repair/replace Old with Old
How can I determine the construction cost for my dwelling?
Hiring a professional appraisal service
A professional appraiser, or "Perito Valuador," as they are commonly referred to in Mexico, will be the single best resource available for determining accurate valuations. Appraisers in Mexico are often also qualified as architects. It is best to use an appraiser that has been recognized by the local property tax authorities in the area.
Going over original construction records and receipts
If a dwelling was recently built, for example during the last year, the construction cost may still be useful and applicable. Reviewing the records and receipts of the construction project should provide easy access to the figures that are needed for calculating the current construction costs.
Getting comparative estimates from local builders
Calling around and getting several comparative construction cost estimates from different, reputable local builders is a good way to determine the average construction cost amount in the area.
Talking to a local real estate professionals
Realtors and titling companies are routinely exposed to current property values during the performance of their daily duties, which also makes them a potential resource for determining the average cost of construction.
Talking to the neighbors
Your next door neighbors likely also need to insure their dwellings, and they may have already done much of the leg work and research required to determine the average cost of construction in your specific area.
Meters versus Feet, and Pesos versus Dollars
Mexico, like most countries in the world, uses the metric system for measurements, instead of the older imperial system, that is still being used in the U.S. Therefore, the cost of construction in Mexico is typically estimated per square meter instead of per square foot. One square meter is equals 10.7639 square feet. Construction cost estimates in Mexico may also show the amounts in pesos instead of dollars. The currency exchange rate for dollars to pesos continually fluctuates, so a little research and a calculator may be required to make accurate conversions.
Money saving tip
Remember, when purchasing insurance for a home, the limit of coverage should only be based on the cost of replacing the dwelling structure. The value of the land on which the dwelling sits should never be included in the dwelling's limit of coverage. Dwelling insurance coverage does not pay to replace any land, but instead only pays to repair or replace the dwelling itself. Including the value of the land in the limit of insurance for a dwelling, only increases the cost of a policy, without actually increasing the amount that would be paid out after a loss.