Car Insurance: Does it Cover Theft?

Nearly 750,000 cars were stolen in the United States in 2018. This might sound like an extremely high number, but your chance of having a car stolen is still just 0.23%. Regardless, getting a theft insurance plan for your car is a necessity if you plan to drive in the U.S.

Does car insurance cover theft? The answer is both yes and no, depending on what exactly is stolen. We’ll go over what types of theft are covered by your auto insurance policy and how to make sure all your belongings are sufficiently insured in case they’re stolen.

Does car insurance cover a stolen car?

Whether or not your car insurance covers theft depends on what type of policy you have with your insurance provider. Theft insurance for stolen cars falls under the comprehensive insurance part of your auto insurance policy.

Comprehensive coverage includes types of damage that aren’t caused by a collision, like vandalism, fire and natural disasters. Theft of your vehicle falls into this category. If your car is stolen, your insurance provider will pay for a new one up to your comprehensive coverage limit, which is why it’s important to make sure that the limit on your policy covers the full cash value of your vehicle.

However, even if your policy limit is high enough to replace a stolen car, you’ll still be responsible for paying your deductible.

Whether or not you have comprehensive coverage to replace a stolen vehicle depends on your policy. This type of auto insurance isn’t legally required by any state; many only require you to carry bodily injury and property damage liability.

If you have financing on your vehicle, though, it’s likely that the lender requires proof of comprehensive insurance. Even if you own your vehicle outright, you might still want to carry comprehensive coverage. Theft insurance is much more affordable than being out of pocket for the full cost of a new vehicle.

Does car insurance cover theft of personal items?

Some drivers assume that if their auto insurance policy covers a stolen car, it will cover everything in the car that was stolen too. Unfortunately, this isn’t usually the case.

Believe it or not, the best way to insure personal items from theft – even if they’re stolen from your car – is through a homeowners or renters insurance policy.

Personal property coverage is a part of your property insurance policy that covers the cost of replacing your belongings both in and out of your home. There are two options for calculating personal property coverage: actual cash value, which covers the cost of the items at the time they are stolen (taking depreciation into consideration), and replacement cost coverage, which covers the cost of purchasing entirely new items of the same quality (without taking depreciation into consideration).

All homeowners and renters insurance policies set a limit on personal property coverage that might not pay for some high-value items like fine jewelry or high-end electronics. Consider purchasing additional coverage for items that wouldn’t be fully paid for if they were stolen from your car. This is called scheduled personal property coverage and can usually be added easily to your property insurance policy.

If you rent your home, personal property coverage included in the landlord’s insurance policy won’t cover your items. You’ll need a separate renters insurance policy if you want theft insurance for the personal items in your vehicle.

What do you do if your car is stolen?

If your car is stolen, try not to panic. Instead, take swift action to minimize the impact and protect your finances. Follow these steps to begin an insurance claim and start the process of recouping the cost of your car and personal property.

  1. Contact your property insurer: If personal items were stolen with your vehicle, you should first see what – if any – will be covered by your auto insurance policy. Then, let your homeowners or renters insurance policy cover the rest. This will involve filing a separate claim with your property insurer. However, if you’ve bundled property and auto policies through the same provider, this process may be streamlined.
  2. File a police report As soon as you’ve discovered your vehicle was stolen, call the police to report the theft. Provide identifying information such as the make, model, color and license plate number. If your car (or any personal item left in the car, such as a smartphone) has a GPS tracking system, provide that information as well.
  3. Make a list of the items in your car: While your memory is still fresh, write down everything that was left in your vehicle at the time that it was stolen. For high-value items like laptops or other electronics, gather as much documentation as possible, such as original receipts and/or serial numbers of the devices.
  4. File an auto insurance claim: Be prepared with several documents to claim a stolen vehicle. Most auto insurers won’t accept a claim involving theft without a police report. You’ll also need to include a list of the personal items that were in the car when it was stolen. Some insurers will also want to know who had access to the car and where any extra copies of the keys were kept.

The bottom line

Does car insurance cover theft? It depends. Make sure you have comprehensive coverage against theft of your vehicle with a limit high enough to cover the car’s value. Then, check with your homeowners or renters insurance provider to check that you have theft insurance for your personal items. Between these two policies, you can rest assured that you’ll be financially protected if your car is stolen.

Save Money on Car Insurance

My wife and I switched our auto insurance coverage recently and paid our full annual premium up front. It was a painful little payment, even though we had shopped around and such. This led us to both researching various methods with which one could save money on auto insurance. Here are seven useful and applicable tips that we discovered to save money on car insurance.

Take a defensive driving course. If you have a speeding ticket or other minor violation on your record, it generally boosts your premiums on your auto insurance. Most states keep track of your violations through a point system – each violation earns you a number of points and each year sees a small reduction in points. Your point total is what insurers use to adjust your premiums upward – the more points, the more you pay. Taking an optional defensive driving course offered by your state for a small fee (some states, like Idaho, even offer these online) can net you a reduction of a few points, directly saving money on your insurance. A $30 course and a few hours can see as much as a 10% reduction in your premiums over the next few years.

Look at a combination homeowners policy and car insurance policy. We did this (because we happened to be moving at the time as well) and found that a combination package that covered both of our vehicles as well as our home was substantially less expensive than the independent insurances would have been. If you’ve got home and auto insurance through separate companies, call up your agents and ask for quotes on combination packages – likely, that will save money.

Increase your deductibles. If you’re in good financial shape with a well-built emergency fund, look at raising your deductibles. This will directly lower your premiums, but still cover you in the case of a major accident. I found that if I raised my deductible from $500 to $1,000, that $500 difference is paid for in just over a year by letting me put that $500 in my emergency fund instead. After that, it’s just cheaper monthly bills.

Work on improving your credit. If you have some dings on your credit report, this can negatively influence your premiums. Insurance companies use as much information as they can get to estimate how risky of a driver you are, and if you have lots of credit issues, you’re much more prone to risky behavior. Keep all of your bills paid on time and work on lowering your credit card debt.

If your car is old, remove collision coverage and just go with liability coverage. My rule of thumb is that if a car’s cash and/or trade-in value approaches $1,000 (or less), you should just go with liability coverage. A car in that state is nearing the point of replacement anyway, so if you get in an accident, it’s probably going to simply need replacement and the cash value of the car is negligible – you’ll probably not get much less selling it for scrap. So don’t throw out good money in this situation – move to just liability coverage.

Pay your annual premium all at once. If you pay semiannually, quarterly, or monthly, you’re likely paying a fee each month for this “convenience.” Instead, just save up the premium in a savings account and pay it once a year. Let’s use an example of a person whose annual premium is $900 a year, and each payment plan charges a fee of $8.95 a payment. If one pays monthly, that means a monthly bill of $83.95 every month. Instead, a person could put only $73.50 a month into a 5% APY savings account and pay the whole thing once a year without payment fees. That’s a savings of more than $10 a month.

Buy a car that’s less prone to theft or accident. Insurers also take the type of car you’re buying into account, even down to the color. A flame-red Mustang is going to have far higher premiums than a silver-colored Honda Odyssey, for example. Why? Aggressive colors are often linked to aggressive drivers, and vans are often a sign of a stable and secure situation (what kind of person drives a minivan versus what kind of person drives a Mustang). Consider the statement that your car makes about you – and consider that same statement is being made to the insurance company.

Remember, if you do all of these things and your premiums don’t budge, it may be time to shop around for new insurance. Don’t hesitate to get quotes from other insurers if you suspect your current insurance is way overpriced.