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If the display protector went out all the way to the edges of the phone it would cover up the proximity sensor that tells the phone when it's close to your face, which could cause it to trip unnecessarily and then you wouldn't be able to press buttons while on a phone call. Also if it went all the way to the edges it makes it harder to line up accurately and you may get overlap which would allow dust and airbubbles to get underneath, making it look terrible.
At least that's the best explanation I can come up with, and I'm probably wrong.