Will my car insurance cover auto theft?
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UPDATED: Mar 13, 2020
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Car theft is a growing problem in our nation, with millions of dollars every year counted up to losses from automobile theft. The most commonly stolen car in the United States is the Cadillac Escalade; however, common cars such as late-model Honda Civics and Toyota Camrys are often the target of car thieves as well, as they can make a quick turnaround on these desirable models.
Does your car insurance pay for car theft?
Only if you have a particular type of coverage called comprehensive will your insurance pay if your car is stolen. Contrary to popular belief, few companies will deny a comprehensive claim because you left the keys in the ignition; however, a company will certainly deny your claim if you do not have comprehensive coverage.
When you purchase insurance for your vehicle, there is only one type which is “required” by the state: liability coverage. In no-fault states, this means you must have a certain amount of liability and personal injury protection, or PIP. This pays for bodily injury to you and others in your vehicle. In tort liability states, liability pays for the bodily injury and property damaged caused to another driver when you are at fault in an accident. Some states also require a certain amount of uninsured motorist coverage to protect drivers involved in accidents with motorists who are not carrying liability insurance.
However, no state requires you to have comprehensive or collision coverage. These are optional types of coverage which repair damages to your car or replace your vehicle if it is stolen. Since you are the injured party in these cases, you have the responsibility to provide your own coverage for these sorts of mishaps.
Collision coverage pays for the damage to your car if you wreck it yourself.
If you cause an accident with another vehicle, back into a tree, or in some other way damage your car through your own fault, collision coverage is what pays for the damage to your car. You must also pay a deductible with your collision coverage which is set by you and the company in agreement; many people choose to raise their collision deductible to make their insurance payments more affordable, but this means they have to pay more before the insurance company kicks in to pay for repairs.
Similarly, comprehensive coverage is an optional policy you purchase from the company for an agreed price and with an agreed-upon deductible amount. Comprehensive covers just about everything which liability and collision do not: damage from wind, hail, water, fire, flying objects, hit-and-run accidents (in the absence of uninsured motorist coverage, or in states which require comprehensive policies to pay for these damages), and, of course, auto theft. Any damage caused by something other than a collision with another car is usually covered under your comprehensive policy.
If your car is stolen, your comprehensive policy will pay for the replacement value of your vehicle.
This is where many people make a grievous error when purchasing comprehensive coverage. They realize they need this protection, but neglect to ask exactly how the value of the car will be assessed. If your company uses “blue book” value to replace your vehicle, it is likely you will receive far less than you anticipated. Some people cannot even pay off their car loans if the insurance company only provides book value. It is wise in cases where your vehicle is financed, and especially for the first five years of ownership, to have something called “gap coverage” which forces the insurance company to pay whatever is owed on your vehicle, not just the book value, if it is stolen or totaled.
You will be required to file a police report on the theft of your vehicle. If the vehicle is located, the insurance company may elect to return the vehicle to you and pay for any repairs necessary to bring the vehicle back to the condition it was in when it was stolen. The company may also elect to total the vehicle and pay you replacement costs, depending on the damage done while the car was out of your control.