YES, and NO. It depends upon the scenario encountered. For example…
It depends entirely upon what type of coverage you have and what State your policy is issued.
For instance, in the State of Texas, which obviously borders Mexico, there is what is commonly referred to as a “Border Endorsement” to your Texas Auto Policy.
This particular endorsement, however has some serious restrictions and limits.
Currently, the Texas Dept of Insurance provides some very limited information as to what your Texas Auto policy will cover. Everything, and I mean everything written in this publication does not address whether your policy will or not cover you in Mexico. It is ambiguous at best, and misleading in some respects.
*Driving in Other States, Canada, and Mexico
A Texas automobile insurance policy usually meets the financial responsibility requirements of other U.S. states and Canada. Mexico, however, does not recognize U.S. auto liability policies.
Mexican authorities can hold drivers criminally and financially responsible for any auto accidents they cause. If you’re in an accident that results in an injury, police may detain you until they determine who is at fault. You will have to show that you either have insurance recognized by the Mexican government or the financial ability to pay any judgment against you.
Some U.S. companies provide a free endorsement extending your policy’s coverage to infrequent trips of up to 10 days and as far as 25 miles into Mexico. You can buy coverage for longer stays, but it is usually valid only within 25 miles of the border. In addition, these endorsements might not meet Mexican legal requirements.
You may be able to buy a Mexico “tourist” endorsement for your U.S. policy. This endorsement extends your liability coverage to pay costs exceeding a Mexican liability policy’s limits. It covers trips of any distance and any length of time. Ask your agent which endorsements your insurance company offers.
The aforementioned was taken directly from the Texas Dept of Insurance Web Site for Auto Publications.