Does Car Insurance Cover Stolen Cars?

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Now you see it. Now you don’t. Car thefts happen, so it pays to be prepared. 

In the year of the coronavirus, we have seen a spike in car theft. According to a preliminary analysis by the National Insurance Crime Bureau, there were 873,080 auto thefts in 2020, a 9.2% increase from the year prior.

Auto theft accounts for over $6 billion in losses per year, with an average loss per vehicle of nearly $8,900.

You can protect yourself from car theft by remembering to lock your car, take your keys with you, and park in well-lit areas. But if you find yourself the victim of auto theft, here’s how your insurance provider might help you — and what you should do to protect your finances.  

Does Car Insurance Cover a Theft?

Comprehensive car insurance helps pay to repair or replace your vehicle if damaged in a non-collision incident. It also helps pay to replace your vehicle when thieves strike or replace stolen parts, such as wheels or electronic equipment.

Besides covering losses caused by theft, comprehensive insurance also covers losses caused by:

  • Contact with animals such as hitting a deer on a dark country road.
  • Fallen objects such as tree limbs.
  • Fire
  • Natural disasters such as floods and tornadoes.
  • Riots
  • Vandalism

What Type of Coverage Do I Need for Theft?

Comprehensive coverage is the only type of auto insurance that covers vehicle theft. Insurers treat an auto theft claim as if the vehicle were totaled. Comprehensive coverage pays the actual cash value of your vehicle, minus the deductible. A car’s actual cash value is its fair market value, which is its depreciated value.

Pro Tip

If your car loan balance exceeds your car’s value, and your car is stolen, gap insurance will make up the difference.

So, if the provider determines that your stolen car has an actual cash value of $8,000, and your policy has a $500 deductible, you’ll receive a maximum insurance settlement of $7,500.

Automobiles depreciate at an average rate of 49.1% during the first five years, according to a study conducted by iSeeCars. Some SUVs and trucks, including the Jeep Wrangler Unlimited and Toyota Tacoma, depreciate at a lower rate, while vehicles like the BMW 7 Series and Mercedes Benz E-Class depreciate at a higher rate, as high as 72.6% in five years. 

Based on car values provided by Kelley Blue Book, here are a few examples of settlements you might receive when filing a comprehensive insurance claim for a stolen automobile.

$500 Deductible$1,000 Deductible$1,500 Deductible$2,000 Deductible
2018 Ford Escape$10,135$9,635$9,135$8,635
2020 Toyota Camry$16,710$16,210$15,710$15,210
2021 Hyundai Kona$15,396$14,896$14,396$13,896

If your new leased or financed vehicle is stolen, you may not receive a sufficient settlement to pay off the car loan. That’s where gap insurance saves the day. Many insurers offer gap insurance as an optional coverage. If the settlement for your stolen car isn’t enough to pay off the car loan, gap insurance steps in to cover the difference. According to the Insurance Information Institute, most new cars depreciate by 20% in the first year, so gap insurance is a valuable optional coverage when you buy a new automobile. Typically, leasing companies require gap insurance in the terms of the lease.

What to Do If Your Car Is Stolen

Even if you carry comprehensive insurance, you still need to take precautions to prevent thieves from stealing your wheels. “The vast majority of auto thefts occur after owners leave their keys in the vehicle,” says Tim Lohmar, St. Charles County, Missouri’s prosecuting attorney. “The most common scenario is thefts taking place at the home of the car owner.” And commonly, “vehicles are taken from a convenient store, quick shop, or gas station locations, in which the owner leaves the car unattended for a brief period of time,” according to Lohmar. 

If you’re the victim of auto theft, here’s what you should do:

  1. Immediately report the theft to the police. The police will need information about the vehicle, such as its license plate number, vehicle identification number (VIN), color, make, and model. Law enforcement may also ask about identifying marks on the car, like dents, customizations such as chrome wheels, and personal property inside. The police will also ask if you saw and could possibly identify the thief.
  2. Contact your insurer within 24 hours of the theft to file a claim. The police will give you a hard copy of their report, or a case number to reference, which you can give to your insurance company. 
  3. If you find the car, contact the police and your insurance provider immediately. “Never take matters into your own hands. A stolen car is not worth serious injury or loss of life,” says Lohmar.
  4. Inform other people about your stolen automobile by posting on social media. Even if the car isn’t recovered, posting on social media can put your community on notice that a thief is lurking. “Social media sites such as Facebook and NextDoor have proven very valuable with near-real-time information sharing,” says Lohmar. “The more the public is knowledgeable and informed, the more steps they can take to avoid being victimized by auto theft.”

What Happens if My Stolen Car Is Recovered? 

In some cases, authorities can recover stolen cars more easily if they’re equipped with a GPS system. Some advanced GPS systems feature tracking technology, which enables law enforcement to pinpoint the location of a stolen vehicle. 

But if a thief makes off with your ride, chances are you’ll never recover it. “We find that most car thieves, if successful, take the stolen cars to chop shops in exchange for money,” says Lohmar. “Chop shops buy stolen cars, disassemble them, and sell their individual parts for profit, typically within hours of the car being stolen. They are most often working as a part of a larger criminal organization,” says Lohmar. 

If your car is recovered, it may return damaged. Comprehensive auto insurance covers damage to original and custom equipment caused by car thieves, but within limits. “Some things that are not stock equipment require extra coverage,” says Gary Paulson, owner of Mid-Columbia Insurance in Yakima, WA. “Some companies will cover customizations to a limit, like $3,000. But if someone has a $7,000 stereo in their car and it gets stolen, if you don’t have extra coverage to cover that stereo, it’s not going to be covered to replace it.”

If you get a settlement and the vehicle is later recovered, it will belong to the insurance company. But you may have the opportunity to buy it back from the carrier, Paulson says.

Is Comprehensive Coverage Worth it? 

Purchasing comprehensive coverage can make good financial sense depending on your situation. Car owners pay an average annual comprehensive insurance premium of around $134, according to the Insurance Information Institute. If your vehicle isn’t financed or leased, consider its actual cash value before buying comprehensive coverage. “If my comprehensive coverage costs $100 per year, and my car is still worth $2,000, it makes sense to have it,” says Paulson. It might not make sense when the car value reaches $1,000 or less, says Paulson. 

How to Check Your Coverage and Make Sure You’re Covered

If you have comprehensive insurance on your car, you’ll be covered if it’s stolen or damaged. Other types of insurance, like liability and collision insurance, don’t cover a stolen car.

That’s why it’s always a good idea to double-check your policy and make sure you have the right type of coverage, especially if you’re more susceptible to car theft in your area. 

You can do this by logging into your online portal with your insurer and checking your policy declaration page, or by calling your insurance company and asking them to verify what’s covered and what’s not under your auto insurance policy. If you own multiple vehicles, make sure you have the right amount coverage for every car.