What Does an Overseas Trip Mean for Your Auto Insurance?

A short vacation might not warrant major changes to monthly services in your home like insurance and cable television, but extended stays in a foreign country can require some extra attention. Reducing the hassles associated with traveling and monthly bills like vehicle insurance policies requires special arrangements before your departure date.

Restarting basic utilities upon your return, such as cable television and local phone service, usually requires nothing more than a phone call. Having a prior subscription with certain companies makes it fairly easy to return everything to normal. Car insurance, however, is one bill that could cause you some problems if you are not careful.

Most vehicle insurance companies offer discounts over time when a customer remains with the same insurance carrier. Unfortunately, an extended absence from the country might require cancellation of your policy, and restarting the policy could be a little more expensive than you might expect if there is a noticeable gap in coverage. Anything less than 36 months of continuous coverage tends to increase policy rates.

There are a few ways to avoid this type of gap in an insurance policy. For example, for short stays overseas that do not exceed six months, you may be able to temporarily suspend a policy and activate it upon return with no gap penalty. Particularly if you currently enjoy a loyalty discount, this is an important request to make of your insurance company before departure. For anyone serving in the military, this issue is generally not a problem; most insurance companies will waive gap penalties upon the service member's return to the country.

Some individuals who travel abroad choose to keep a policy active even though they are not in the country to actually utilize it. Others choose to cancel the policy upon departure and return to the country with the expectation of losing the loyalty discount and paying a higher rate. The decision to cancel a policy is generally guided by the length of stay overseas.

The first step in determining whether paying a policy while absent from the country represents a good financial decision is to call to the insurance carrier and ask how much the discounts save each month. In most cases, you will find that storing a vehicle with active insurance while living abroad in an entirely different country is going to cost too much.

A stay overseas that lasts for several years likely would warrant canceling a policy. Several months of payments would cost more than the loss of the loyalty discount when the policy would be restarted. Upon reinstatement of the policy, you should be prepared to see the policy cost jump anywhere from 5 to 25 percent.

If you feel unsure about whether full cancellation of a policy is the right decision, you do have a few alternatives to paying the full amount on the premium. For example, you might consider dropping the policy down to the minimum legal levels required by your state. In addition, you can reduce the stated mileage on the policy as low as the insurance company will allow; low mileage policies tend to be much less expensive than higher mileage policies.

In addition, you might look into the possibility of only carrying catastrophic coverage on the vehicle to keep a policy active. Much like catastrophic health insurance for humans, these types of policies are designed to cover major events like natural disasters. They also tend to be quite inexpensive, sometimes costing no more than $15 to $20 per month. Although not every insurance carrier offers such policies, the option is worth investigating.

No matter what the coverage option you choose, it is best that you make the decision well ahead of your departure date. A major overseas stay requires plenty of preparation, so to avoid overpaying, try not to leave dealing with your auto insurance until the last minute.