Insurance companies work by creating a wide pool of funds from member contributions, which they use to settle a few valid claims. To remain solvent and mitigate losses, insurers create provisions that limit the items covered in the policy and the circumstance under which they are obligated to pay you. Some of these policy provisions cut across all types of insurance, while others are industry-specific. For instance, the out-of-country exclusion is common for car insurance.
What are exclusions?
According to Bankrate, insurance exclusions are certain types of risks or events not covered by the policy. Insurance exclusions can be a basis for whether or not your claim is denied. Therefore, you must read the substance of the policy to ensure that it provides the coverage you need.
Insurers will only pay for what’s covered in the policy and exclude risks or accidents covered elsewhere. These types of exclusions are called coverage-based exclusions. For instance, a comprehensive policy will cover car theft but will not cater to third-party liabilities or cover collisions.
Medpay insurance exclusions mean that your coverage will cater for the medical bills but will not repair the damage to your vehicle or get you a new one. Similarly, liability insurance will cover your financial obligations to third parties when you are at fault in the accident but will not cater to injuries and damages that directly apply to you.
Some car insurance companies may exclude themselves from covering catastrophes such as earthquakes and floods. This shields these companies from having to pay for claims for high-cost widespread events. However, you may get this coverage from specific comprehensive car insurance policies.
Insurance firms also tend not to pay claims on damages the insured has intentionally caused. For instance, intentionally causing a collision will not earn you payments from your insurer.
What is an out-of-country exclusion?
Car insurance obtained in the U.S. is only valid within the country’s borders. That means the coverage will not be valid should you decide to drive outside the country. Insurance companies do this to avoid the expenses and effort involved in investigating such claims. Some insurance companies, however, may offer temporary coverage if you intend to drive to neighboring countries, such as from the U.S. to Canada or Mexico.
How temporary coverage offsets an out-of-country exclusion
Temporary coverage is insurance that is valid for a limited period. Temporary car insurance is especially applicable if you are not a car owner or don’t need a permanent policy. You may obtain it when renting a car, temporarily borrowing someone’s car for a period, or when you’ve bought a car and aim to resell it quickly.
If you travel to another country and aim to drive while there, temporary car insurance can help you fill the coverage void resulting from out-of-country exclusion. The length of your stay will determine the longevity of the policy.
When getting temporary car insurance, it is important to consider the costs and what’s covered. You may want liability insurance that protects you from third parties and collision coverage that repairs or replaces your vehicle when you are involved in an accident. Also, ask about exclusions, as you do not want to pay for coverage you may not get should the risk materialize.
Also, remember to check if there is a cancellation fee involved if you cancel your coverage because you have to leave prematurely or no longer need it. Refunds for unused prepaid premium amounts are also something you should inquire about. Regular six-month policies that you can cancel when you no longer need them are convenient if you plan to be out of the country for a while.