The coverage area of an insurance policy is the geographical area in which the insured party is able to benefit from the insurance coverage.
Typically for auto insurance cover this will either be on a state basis, on a United States basis, or a North American basis. This will depend on the type of coverage taken out in the insurance contract.
What happens if I leave the coverage area of my insurance policy?
If you leave the coverage area for your insurance policy, you will need to take out additional insurance or you will be effectively uninsured. This means that you will be 100% personally liable for any payments that would normally be covered by your insurer.
What is the reason for a coverage area?
As with most aspects of an insurance contract, the coverage area is there to reflect the risks assessed by your insurer. It is likely that driving in South America is more dangerous than driving in North America, for example, given that generally driving standards are lower in the region, vehicles are not as well maintained and the condition of roads, highways etc. are not as well maintained.
Therefore if you wish to drive in South America your insurer will expect you to pay a higher premium than someone who only wishes to drive short journeys in Idaho (assuming that both drivers have otherwise equal risk profiles).
This is fair and sensible; it means that those owners and drivers that present a lower risk for insurance companies do not have to take on the costs of those that present higher risks.
As can be seen from our example there are clear boundaries of risk which make it easy for insurance companies to balance risk with the premiums charged to policy holders.
Is it possible to increase the coverage area of my insurance?
If you wish to increase the coverage area of your auto insurance policy, you should talk to your insurance agent/broker – in some cases you may increase the coverage on your existing policy, in other cases you may get better value by buying an additional policy for the other areas.
This will depend on the frequency that you require the coverage, and the areas to be covered, as well as individual insurer’s policies relating to geographical risk. Some insurer’s may specialize in riskier areas and offer more competitive premiums for example.