Puerto Rico requires every vehicle owner to carry liability insurance in order to operate a vehicle on its public roads. As such, it behooves any current or future car owner to be somewhat familiarized with the laws and practices regarding car insurance in Puerto Rico, as they can be somewhat different than those on the mainland. If you are a new resident of the island, you will likely also want to have health and renter’s insurance, and in that case you should consult with an insurance agent to start developing your package. Let’s go over the top things you should know about buying insurance in Puerto Rico:
It is not easy to buy auto insurance online in Puerto Rico
Before you dismiss this statement because it is coming from an insurance broker, let me just say that I would love for Puerto Rico to be better integrated technologically and for consumers to have choice. The reality is if you are only buying one car and that is the only property you need to insure, then you don’t need much guidance from an insurance agent if you were able to compare prices online. Unfortunately, that is not the current state of affairs, and in most cases your best option is to develop a relationship with an insurance agent, as you will likely need more than just car insurance at some point. Some companies, such as Aseguratec, are attempting to change this and have made great strides in developing a better technical platform, but we are still ways away in Puerto Rico from being able to have a fully online journey. If you are looking to purchase a car insurance policy, you can also contact us here for a no obligation quote; we work with all the major carriers in Puerto Rico and can give you a good sense of the market.
Caution: When buying an insurance policy, remember that 6 month car insurance policies do not exist in Puerto Rico as is commonplace in the US. Instead, policies in Puerto Rico are sold for 12 month (1 year) terms. This can present some sticker shock if you’re not ready to shell out $1k+ for a policy on top of whatever you’re spending on the new car. Also unlike the US, the insurance carriers will not finance the policy or provide a payment plan, but do not despair, you do have a few financing options for your policy. First up, you can choose to finance with United Finance Corporation (not to be confused with Universal Insurance), who will pay your policy in whole to the carrier and will put you on a payment plan. A caveat to this is that many times this option is not available the first year.
If you’re purchasing a double interest policy at the dealer, which I’ll get more into later on in this article, these policies are typically financed in the auto loan itself. As attractive as this sounds, I strongly recommend you don’t choose a double interest policy, as they can leave you woefully underinsured without any savings to you.
What is the Compulsory Liability Insurance, and does it apply to me?
The “Seguro Compulsorio”, Compulsory Liability Insurance, or Universal Car Insurance in English, is the minimum possible insurance required by law in Puerto Rico. It comes along with your “marbete”, which are the equivalent of the license plate tags in the US, except it doubles as bare-bones insurance. Your marbete is your proof of compulsory insurance; therefore, if you have an expired marbete, you have no compulsory insurance coverage.
For compulsory insurance, it used to that be that only the ASC (Asociacion de Suscripcion Conjunta), provided the $4,000 liability coverage, but as of a couple of years ago, the consumer can now choose between a variety of providers. Some companies, like PointGuard, differentiate themselves by providing 24/7 call centers, while others like MAPFRE, offer “expanded compulsory insurance” which include some modest upsells like increasing liability coverage to $20,000. Generally, all of the compulsory insurance options are grossly overpriced for the coverage they offer, even if you max out all the upsells. More worrying than how overpriced they are is how exposed you will be – a $4k limit will only cover the most minor of fender benders.
How do I get refunded for the compulsory insurance if I purchased private insurance?
When you purchase your marbete, $99 of those dolllars will go towards the compulsory liability insurance. If you have private insurance already, you can ask your insurance agent for a “voucher” which certifies that you are exempt from purchasing this compulsory insurance. If you weren’t able to get the voucher in time and had to pay the $99 when you purchased your marbete, don’t worry you can still contact your insurance agent for the voucher and ask him or her how to get the refund retroactively.
What are the different types of car insurance available in Puerto Rico?
- Liability Insurance – This policy can be public or private – the Compulsory Insurance is a type of liability insurance.
- Double Interest Car Insurance – Usually the minimum required by the bank, typically sold at the car dealership.
- Full Cover – Comprehensive, includes the coverages of the other policies plus coverage for your own vehicle even if the accident is caused by you.
- Gap Insurance – Used in conjunction with another policy when the loan balance is higher than the value of the car.
What does the typical private car insurance policy cover?
It is common for car insurance policies on Puerto Rico to follow the familiar 100/300 standard used in the US. Specifically, this means that the policy can cover $100,00 of bodily injury by a single claimant, but will cover no more than $300,000 in aggregate for all claimants. Comprehensive insurance will cover anything, whether at fault or no-fault, as long as the deductible is paid which is typically in the range of $500. Additional features such as roadside assistance and rental car coverage are also typically available.
What is a double interest policy?
A double interest policy is typically sold at the dealership at time of sale, and is so named because the policy protects the bank’s or auto financer’s interests as well as that of the owner. It is a bit of a misnomer because it really only adequately protects the bank. All it really does is pay the loan balance off in the event of a total loss.
This is because this policy only covers the depreciated or Actual Cash Value (ACV) of the vehicle at the time of an accident. Unless the buyer paid a sizeable down payment at purchase, the balance is loan balance is usually either fairly close to the ACV of the vehicle or it is more than the ACV. In the event that the balance of the loan is more than the car is worth at time of loss, the owner of the vehicle is responsible for the remainder. In cases where the buyer pays little or no down payment, he or she usually needs a “Gap” insurance, a supplemental insurance meant specifically to cover this gap.
A double interest policy has no liability coverage, and many buyers end up running their car with only the compulsory liability insurance, leaving them underinsured.
Insurance for Used Vehicles
Insurance for used cars in Puerto Rico works in the same way as insurance for new cars – you consult with your insurance agent, they provide you with a quote and once you are satisfied you pay your policy.
Some specific details about used cars to keep in mind when shopping for insurance include:
- The roadside assistance benefit is not available for cars manufactured before a certain year. The age limit can vary between auto insurance companies, but in general if your car is over 10 years old it will not qualify. In these cases, you can purchase this service directly from a roadside assistance company such as Connect Assistance.
- Once the car depreciates a certain amount, there comes a point where it is not cost effective to acquire a “full cover” policy. Let’s take the example of a vehicle with a market value of $ 4,000. Let’s say a full cover policy costs $ 500 and a public liability only policy costs $ 100 for this vehicle (hypothetical numbers). If you cause an accident, you will have to pay a deductible (typically $ 500) before the insurance company will pay a claim. Usually, when the damage from an accident reaches 40% of the value of the car, the car is declared a total loss. In other words, in this case, a repair to your car will only be covered if the damage in an accident is between $ 500 and $ 1,600 – a very small window. In the event of a total loss, the company will give you a check for the current value of the car less the cost of the deductible.
Requirements for purchasing a policy
The information your insurance agent will need in order to provide you an auto quote will be:
- Current value of the vehicle
- Make, model and model year of the vehicle
- Cost of the vehicle when it was new (if the vehicle was purhased in the US and imported, this cost would be the hypothetical cost if the car had been purchased in PR).
- Age of the driver
Once you obtain a quote, in order to actually purchase and issue the policy, the insurance company will need:
- Vehicle registration
- Postal address of the insured
- Full name of the insured
Know what you’re getting into before you walk into the dealership
The dealer will try to sell you a double interest car policy no matter what, so it is a best practice to give your insurance agent a heads up when you’re shopping for a car and he or she can let you know your options. Unlike in the US, you’re not legally obligated to have insurance before you drive your car off the lot, since when you buy the car it will come with a marbete and the bare bones insurance. That being said, it is recommended that you do not drive your car around with just the compulsory insurance.
The bank doesn’t care if you get stuck with a $20k liability bill after you get an accident and your compulsory liability will only cover $4k, they only care that the loan balance will be paid off.
Another thing to be aware of is that some dealers are lacking in scruples and may have a deal with an insurance agent where they will get a cut of the commission generated by the agent. This is not legal, but it does happen and it is something you should be aware of so that you know where the incentives are when you are being sold insurance at the dealership.
That’s it for now! I will continue to update this post over time with more information to help you out. I hope you found this information useful, and if you find yourself ready to explore your insurance options, feel free to reach out to us for a free consultation.