When thinking about renting a car in Mexico, the first problem is whether or not to buy the insurance, which generally doubles the price of the car. After researching thoroughly, I found that Mexican law requires liability insurance to be included in the rate for the car rental. Many car rental companies deny this is the case, but it is included--without exception. If they do admit that liability is included, the car rental company will attempt to sell you comprehensive insurance on the vehicle in case of an accident or theft. The insurance which the car rental companies offer has $1000 deductible, so even if you take their insurance, you are certainly not "fully covered."
I was very pleased to find that a call to the AVIS international desk resulted in a lower rate per day than I had been able to find on line, despite diligent searching, and a representative who freely admitted that liability insurance was included in the rate. When I asked if my credit card company would cover the comprehensive, he said I should call the company to verify whether it would or not and to find out what the conditions for the credit card company's insurance were. A call to the credit company told me that the credit card company's insurance does become primary comprehensive insurance in Mexico--and the credit card company's insurance has $0.00 deductible, which means you are fully covered PROVIDED you turn down the auto rental company's insurance. If you accept the rental company's insurance, the credit card insurance is no longer primary, and you are liable for the deductible.
The result, of course, is that the base rate quoted by AVIS is all you need to pay. I stress AVIS because other companies I called said liability was not included and that I must buy their insurance. AVIS said they had been told that in Mexico the renter is not always told that liability is included and suggested that I download the information from their web site and take the information from the credit card company's site detailing coverage with me as well as phone numbers to call if problems should arise.
I am happy to report that I had absolutely no problems in Mexico. At the AVIS desk they could not possibly have cared less whether I took their insurance or not. I declined and we went to look at the car. I pointed out numerous dings and scratches here and there because I had heard from others who have rented in Mexico that it is almost necessary to take a photo of the car so you can prove you didn't damage it. The attendant merely put a checkmark on each side of her diagram and indicated that the car had dings here and there. When we returned the car, they took a prefunctory glance to be sure we had not caved in the side of the vehicle, and drove it away. The whole experience was pleasant and without incident.
To sum up, liability insurance is included; your credit card probably provides better insurance than the rental company, and the credit card insurance costs no money. I do recommend AVIS as a rental company in both Cabo and Puerto Vallarta.