Have you booked the hotel already? I've found the best deal is to book through Orbitz for a hotel/ car package and the cost is usually equal to or even less than the hotel booked alone. The cost of the car is basically the insurance costs. To answer your other question, you are required to have liability insurance in Mexico through the Auto Rental company. Its usually included in the price. But you would be wise to purchase additional liability as the required amount is minimal by US standards and may come up short if you do have an accident and hurt someone. The collision damage waiver (CDW) is not "insurance" it is a daily fee amount agreed to between you and the rental company to release you from responsibility if you wreck their car. Most people purchase this for if you don't they won't let you leave the country until you come up with the funds in cash. Your insurance on your credit card or home insurance carrier may cover this, but you still will need to produce the funds in Mexico prior to leaving and then get reimbursed when you get home. If you have an Amex card they have a special program you need to sign up for that charges a flat ~$20ish fee for up to ~40 days of Damage Waiver coverage. This is way cheaper than the $25/day most of the Auto agencies charge. I would only use this option with a name type auto agency, ie Hertz, Avis ect. I've used it with Avis in Cozumel several times. Never had to make a claim, but the Avis people knew of the program and agreed that in the event of an accident, they would charge the damages including up to a totalled car, to your Amex card rather than need cash, and I would settle the claim with Amex upon my return. If you go down this road you have to use your Amex card to purchase the car rental or even the entire package if it includes a car.
Good luck finding the option that works best for you. Being that far south on the island you will have a much better time having the car and the flexibility to explore.
Rich
