Top Differences in Insurance between Puerto Rico and the United States mainland

dynamicinsuranceAuto Insurance, General Insurance

The market for insurance in Puerto Rico has several marked differences than that of all states in the USA. There are also some similarities, which you can read about HERE, but it is invaluable that you become familiar with the main differences, as the entire process for buying insurance is different and could have implications in your moving decisions, such as how you set up your business or where you deicide to move to.

Here are the top differences:

  • Auto insurance – Auto insurance is very different from the mainland due to three main reasons:
    • No 6 month policies – All auto policies in Puerto Rico are yearly policies, and 6 month policies – the market standard in the mainland – are not offered by the Puerto Rican carriers.
    • Compulsory Insurance ( “Seguro Obligatorio” ) – The single biggest difference is the fact that in Puerto Rico there exists a “compulsory insurance” that is in effect included when you purchase your yearly car tag renewal (“marbete”). At renewal, you will pay $99 on top of the $99 “marbete” fee for your tags, which will provide you with the $4,000 of compulsory liability coverage. The “marbete” can be purchased from most bank branches, and if you bring with you evidence of your car being already covered by a private market policy (this evidence is commonly called a “voucher”), you will be exempt from these $99. You can also bring the voucher after the fact and the $99 will be refunded.
  • Auto insurance at the dealership – Most auto insurance policies in Puerto Rico is sold at the dealership, with a policy provided by a bank (also a particularity of the Puerto Rican market), and many times is financed into the monthly car payment itself. In most of these instances, the dealer will push what is called a “Double Interest Auto Policy”. The policy’s term will typically be for the term of the loan, as at the end of the loan term the bank no longer has a financial interest in the car.
  • A double interest policy will cover only the depreciated value (Actual Cash Value or ACV) of the car at the time of a loss. In the event that the car is a total loss after an accident, and the value of the car is less than the outstanding balance of the loan, then the owner will be responsible for covering the difference. This difference is why many times the policy is purchased in conjunction with “Gap” Insurance at the time of purchase, which covers this difference. The double interest policy has no liability coverage, and the typical result is that many buyers run with only the compulsory insurance for their liability coverage, leaving them very exposed to financial damages in the event of an accident.
  • Health Insurance
    • Government Health Insurance (also known as “La Reforma”) – In Puerto Rico, there has been a government sponsored health insurance plan since 1993. This plan covers the majority of the population, and is operated in conjunction with private carriers who have exclusive contracts with the government to service the plan in different regions of the island.
    • Copays/deductibles (“deducibles”) – Ok, pay attention closely here because this is the source of many confusions. In Puerto Rico, the word “deducible”, which literally means deductible, is often used to refer to the copay, and not the deductible. This is because many plans operate on a copay only basis, and high-deductible plans are not yet commonplace in Puerto Rico.

  • Role of the insurance agent/broker – This is perhaps the biggest difference between the Puerto Rican and the mainland insurance market. In the US, particularly for personal lines, it is common for the consumer to be able to quote and purchase directly from the insurance carrier online, while in Puerto Rico this option is not very developed. There is one early stage company, Aseguratec, which has attempted to do this for auto, but by and large insurance is still primarily sourced through independent brokers. Most agents in Puerto Rico are independent agents, and all good ones should represent all the major carriers.