FOREIGN TRAVEL PROTECTION PROVIDED BY PERSONAL INSURANCE POLICIES

(May 2023)

The type of personal lines insurance that an individual or family carries on their property, auto and to protect against their liability to others determines the protection that person or family has when they travel outside the USA. It makes sense to carefully review all personal insurance policies in order to determine existing coverage.

Personal Property Coverage

A homeowners policy covers the personal belongings of a family traveling anywhere in the world. The belongings are treated as unscheduled personal property and the policy's entire contents limits (typically Coverage Part C) are available.

Example: Hector Globetrot and his family are from Vermont and are taking their dream vacation in Europe. Right after arriving in Venice, a fire breaks out in their hotel’s restaurant and spreads throughout the building. Hector loses all of his belongings (hotel employees were able to get the rest of the family's yet-unpacked suitcases out of the room). Since Hector's large suitcase contained all of his new, tailored suits, the loss is more than $3,000. Fortunately, their HO policy will handle the loss (net of their deductible and depreciation).

Personal property special limits must be considered. Homeowners policies, regardless of which cause of loss form is used (basic, broad or special form), have sub-limits that apply to unscheduled personal property. The substantially lower limits are activated for specific types of loss. Typically, theft of jewelry and furs is limited to $1,500 in any one occurrence, regardless of the number of pieces involved. There are limits for loss of money, which is capped at $200, $1,500 in total for letters of credit, passports, tickets and related items, and a maximum of $2,500 on the residence premises ($1,500 away) for property used for business purposes.

Note: The limitations referenced are illustrative and common but may vary according to form and insurer.

HO 00 03–ISO Homeowners 3 - Special Form Coverage Analysis

HO 0003–AAIS Special Form Homeowners Analysis

Special attention must be given to the coverage limitation for jewelry and furs. Insureds should be encouraged to place expensive property of this kind in a safe deposit box or storage facility. The common practices of leaving it in hotel rooms or carrying it around increases the chance of loss, particularly by burglary or robbery.

Another consideration should be made for high-value property. If the total value of furs or jewelry is greater than $1,500, the items should be scheduled (specifically described on a list) at their current value and insured on special form (replacement cost) basis. This may be accomplished by attachment of a scheduled personal property endorsement to a homeowners policy or by writing a personal articles floater policy. This method of coverage is strongly suggested regardless of foreign travel, but a trip abroad provides an even greater incentive.

Personal Articles Floater

Personal Jewelry and Furs Insurance

The $200 limitation on money with regard to foreign travel is quite modest so, if a decision is made to carry significant amounts of cash, one option is to look into increasing this limit. Of course, if available, it would be accompanied by its own, additional premium. In many instances, scheduled coverage is particularly valuable.

The foreign traveler would handle his or her risk of loss better by avoiding use of large cash amounts. It is, generally, safer to use charge cards and to carry travelers' checks, exchanging them for cash for daily needs.

Among the “Additional Coverages'' provisions in a homeowners policy, there is one that applies to the unauthorized use of a credit card that has been lost or stolen. The coverage pays for loss up to $500 (some carriers provide higher amounts on an automatic basis). Additional limits are often available by endorsement for an additional charge. Major card companies have offices in countries frequented by vacationers and inform holders of their cards to report card loss promptly, stressing arrangements for fast replacement. Nevertheless, insurance protection is reassuring.

Personal Liability Coverage

Personal liability coverage does not have territorial restrictions. Generally, liability protection responds to claims against insureds arising from personal acts that occur in foreign countries.

Example: A couple of months ago, Heather was rushing out of a small London café in order to catch a tour bus. Since it was raining, she whipped out her umbrella….and struck a young banker in the eye, severely injuring her. Heather gave the injured worker her contact information and returned home after her vacation. She isn't surprised to get an email from London. It contains bills for the injured banker's medical bills and a claim for lost income. Heather forwards all the information to her insurer who tells her that it’s eligible for coverage.

It is important that details be reported to the insurer as promptly as possible in order to comply with policy notice requirements, should a liability loss occur.

Note: While coverage is provided for personal acts outside of the USA, any lawsuit seeking damages must be brought in the USA or a covered territory as defined in the policy. Most policies contain wording similar to the following:

"The Coverage territory includes the USA, its territories and possessions, and Puerto Rico, or the entire world—if it is found that it is the insured's responsibility to pay damages as determined in a suit based upon its merits and brought in the USA or Puerto Rico or in a settlement agreed to by the insurer."

Personal Auto Policy

Personal automobile policies written to cover private passenger automobiles owned by individuals and families apply only in the USA, its territories and possessions, Puerto Rico, Canada, and while a covered car is being transported between ports thereof.

Canada

Unendorsed personal auto insurance policies written in the United States are valid only in the USA. Such policies should no longer be considered sufficient when driving across the border into Canadian provinces and territories.

Currently, any individual insurer who desires to provide compliance for insured drivers must file a Canada Non-Resident Inter-Province Motor Vehicle Liability Insurance Power of Attorney and Undertaking (PAU). By filing the PAU, U.S. insurers agree to several criteria regarding financial responsibility for possible civil actions against insured drivers. The requirements include a commitment to satisfy judgments at least at the minimum financial responsibility limit in the relevant province. Other relevant commitments also apply. Compliant U.S. insurers are provided with Canada Non-Resident Inter-Province Motor Vehicle Liability Insurance Cards to distribute to insured drivers while motoring in Canada. For more information,

Mexico

In Mexico, insurance purchased for protection in the United States is of no value. A family or individual driving from the USA to or through Mexico should obtain a special tourist automobile policy. The policy must be written by a Mexican insurance company that is licensed by the Insurance Commissioner of Mexico. Travelers to different countries must be aware that laws may differ substantially. In Mexico, a traffic accident is treated as a criminal matter and, often, participants may be subject to incarceration. A proper policy, with coverage that responds to its legal environment, should be purchased at the border or from a legally authorized agent prior to entry. Offices of automobile clubs in border states are a convenient source of the needed protection for many motorists, as are other offices that feature the service.

Related Court Case: Geographic Limitation Clause Challenged

Rental Cars

Driving a rented car in other countries requires insurance written to conform to the laws and regulations of such countries. Rental agreements used by major car rental companies include or make provision for insurance that complies with local requirements. Keep in mind that the omnibus provisions of a personal auto policy are of no value with respect to cars rented (or purchased) while abroad.

Personal Umbrella Liability Policy

Personal umbrella liability insurance applies worldwide, without territory restriction. Its value to the family or individual traveling abroad is readily apparent. But as mentioned above, watch the definition of covered territory in the policy. Coverage may be worldwide, but the suit may have to be brought in the defined coverage territory.

The personal umbrella liability policy is subject to excess and retention provisions, but it is a guarantee against the threat of high-dollar, third-party claims arising from personal acts and use of non-owned autos in distant places. The trip abroad makes clear the importance of umbrella protection that the traveling individual or family will want to keep as a permanent part of its insurance program.

PU 0001–AAIS Personal Umbrella Liability Coverage Analysis

ISO Personal Umbrella Liability Policy Coverage Analysis