State of danger possibly covering area (7)
I believe the answer is:
grenada
'state' is the definition.
(Grenada is an example)
'danger possibly covering area' is the wordplay.
'possibly' is an anagram indicator.
'covering' means one lot of letters goes inside another.
'area' becomes 'a' (maths abbreviation).
'danger' is an anagram of 'grenda'.
'grenda' going around 'a' is 'GRENADA'.
'of' is the link.
(Other definitions for grenada that I've seen before include "Caribbean island country" , "Island just north of Trinidad" , "Nation" , "A garden (anag) - Caribbean island" , "Island N. of Trinidad" .)