Does Car Insurance Cover Theft?

Everything you need to know about car insurance and theft coverage. We'll cover what to look for in a policy, and how you can buy coverage that suits your needs

Car Theft Crashed Window

This core question might seem to have a relatively simple answer in some people’s minds, but when you actually sit and think about it, can you really say for sure if your current car insurance policy covers theft? Did you read the policy cover to cover when you bought it? Or like most people did you just read the highlights on the website where you bought it and were satisfied with that. Did theft even occur to you as an important element of coverage?

In today’s blog, we’ll be exploring these ideas while trying to comprehensively and meaningfully answer the core question of whether or not car insurance covers theft.

Is My Car Insured Against Theft?

It depends on your car insurance. Comprehensive car insurance generally covers theft, including broken windows or other damage resulting from theft. Your liability insurance will most likely not cover theft, as it usually covers injury and property damage.

At the time of writing, no state in the US requires any car owners to insure their car against theft, and therefore if you have purchased a more budget-friendly liability-only policy with minimum coverage, then the likelihood is that you actually don’t have specific coverage that covers the theft of your vehicle.

Broadly speaking, cars and theft meet in 2 basic sets of circumstances. The first is one where the car itself is stolen. This is one people arguably fear the most, and understandably so. The second circumstance is where the car is broken into and valuable personal property is stolen from inside the car such as smartphones, laptops, tablets, cash, jewelry or other items of value.

The first important takeaway which we will explore is the fact that common liability insurance does not cover the first circumstance. You will need comprehensive insurance to ensure that you have cover against the theft of your car. 

The second takeaway is that virtually no car insurance policy, comprehensive or otherwise, covers personal items that are stolen from inside your car. If the car window is smashed to get to them, then that damage will be covered, but items stolen are not. To have coverage for stolen items, a separate homeowners or renters insurance is required.

RELATED: 10 Tips for Cutting Car Insurance Costs

What Does Liability Insurance Cover?

If common liability insurance doesn’t cover something as fundamentally important as the potential theft of your car, what does it cover? Put simply, liability insurance is designed to cover injuries to 3rd parties and damage done to the property of third parties. In other words, it’s not designed to cover any of your own personal property or injury at all. It’s to cover your own liability for injury and damage done to others.

Liability insurance, also known as third-party-only insurance in countries like the UK, is the minimum level of coverage required by most states in order to allow drivers to safely drive their vehicles on public roads. Equally, if your car is damaged by another driver’s actions and that person carries liability coverage, then their insurance provider will cover the cost of those damages, but not the costs of any damage done to that driver’s car.

What Does Comprehensive Insurance Cover?

As the name suggests, a comprehensive insurance policy covers both sides of the equation in any car accident or claim situation. As well as all the third-party coverage provided by liability insurance, comprehensive insurance also covers the policyholder’s vehicle and any bodily injuries that are incurred as well.

One of those coverage items is the car being stolen. Comprehensive coverage typically insures the car against:

  • Theft
  • Vandalism
  • Catalytic converter theft
  • Key theft
  • Any damage done to the vehicle during a theft – broken windows, locks, etc.

So, the first lesson for concerned car owners who are worried about car theft in particular is that if you want coverage, you have to first get a comprehensive coverage policy. It will certainly raise the price overall, but you can bring the price down with a few measures:

  1. Offer a higher deductible
  2. Boost your personal credit score
  3. Upgrade security equipment on your car and install a tracking device
  4. Be a careful driver for at least a period of 3-5 years so you can prove a record of careful driving
  5. Keep your car in a more secure location: in a locked garage, on a gated driveway, in a secure underground parking lot, etc.

Your zip code can also have a great bearing on the cost of comprehensive coverage. If car theft in your zip code is fairly common, then insurance companies are aware of that and any car left in street parking will be subject to price increases to get comprehensive coverage that includes theft and vandalism. Anything you can do to improve your security situation will help with those costs.

How is Homeowners/Renters Insurance Linked to Car Theft Cover?

Purchasing a comprehensive insurance policy that covers car theft and vandalism/damage to the car is the first important step. However, as we mentioned above, the car insurance coverage only goes so far. It protects you in the first set of circumstances that we discussed where a thief or vandal attempts to break into and/or damage your car. But what about the second set of circumstances? How can one protect any valuable goods that are in your car?

Well, the first advisable thing is to never maintain a habit of keeping valuables in your car and/or leaving them unattended for long periods of time. If you must leave something valuable in the car, ensure that it is not visible and that no other indication is present that would alert would-be thieves to its presence. Thieves don’t tend to break into cars indiscriminately, but rather identify vulnerable vehicles where they have reason to believe there are goods of value inside.

The next practical and important thing to do is to get homeowners or renters insurance, the coverage on which will extend to items that you might have in your car. You will still have to read the details of your coverage on your policy to be sure that items in the car are covered. Don’t assume that it’s always covered in every policy, and you won’t end up with any nasty surprises.

What Happens if My Car is Stolen When I Have Comprehensive Insurance?

If you already have comprehensive insurance coverage, then you will have the crucial layer of protection for if and when your car is stolen. In the first instance, you need to report your car stolen to the police. They should then hopefully undertake measures to recover the vehicle. If appropriate recovery measures are unsuccessful, then failing any other breach in your policy terms, the insurance provider should pay out the current market value or the actual cash value of the vehicle, depending on what you had previously agreed.

Your comprehensive coverage still has a deductible, which you will have to pay first. If you had a policy with a lower deductible, then your overall premium was probably higher, but at least if your car is stolen you don’t have to pay out as much yourself. A higher deductible means you’re paying more out of your own pocket, but likely have enjoyed lower premiums up to that point.

What Can I Do to Better Protect Myself from Car Theft?

If you’re concerned about car theft in your area, then a comprehensive car insurance policy backed up with homeowners or renters insurance is the first thing you should do to protect yourself financially against any loss or damage done to your vehicle.

Second, you should try to upgrade your car’s overnight storage to the form of a locked or secured garage space, or as close as possible to that. It might involve some additional expense if you are, for example, to rent a space in an underground garage, but the savings on your insurance should help to offset that cost, and then some.

Next, you should upgrade your car’s security features to include a more advanced alarm system, mechanical immobiliser, and a tracking device that can’t just be removed. Some people install devices in their OBD-II port, but these are easily located and removed by savvy thieves. A more permanent and non-removable solution would be better.

Take these steps for better security and greater peace of mind! As a last resort, and if it’s practical for you and your family, you can also consider relocating to a zipcode that is classified as safer. That too will automatically make costs lower for you and make the above steps more affordable and more effective at creating financial savings.