U.S. and Canadian auto insurance policies are not recognized in Mexico; only policies from a Mexican insurance company are. Each Mexican state sets potential civil and criminal liability amounts a driver would be responsible for in case of a fatality or fatalities to others. The liability amount may be as high as U.S. $300,000 per fatality or more depending upon the state you are traveling in. Read more about the law.
A Mexican Insurance policy greatly reduces the financial burden you might come by after an accident and may reduce jail time.
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