My parents live in Mexico and do not have US car insurance anymore. What type of coverage do they need to be fully covered in the event of an accident?
Some rental companies require that foreigners purchase one or more of their coverages. Check the policies or rules or terms on the rental company's web site or Travelocity.com, assuming the worse of the two versions.
The same may be true for U.S. citizens visiting Mexico or France or wherever.
Liability insurance and property damage insurance is really the most important. Almost always the policy on your own car will cover, check with the insurance agent especially for out of country rentals. If neither your own policy nor your credit card offers the kinds of insurance you need including collision, you should buy it from the rental company.
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