Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Apr 8, 2022

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Insurance Q&A: “What type of car insurance covers theft?”

Many consumers mistakenly believe that purchasing an insurance policy, no matter which one, will automatically cover any potential insurance claim they may have. This, sadly, is not the case and many of us learn the hard way that the auto policy we thought put us in a magic bubble, does not provide coverage against every loss we may suffer.

Case in point; auto theft coverage. Thousands of cars are stolen each year, many of which are not insured, which leaves the victim high and dry.

What’s worse is that the top 10 stolen vehicles typically do not “fit” the type of vehicle that would prompt us to purchase the coverage necessary to reimburse us for our stolen car.

What do we mean? Well, only two of the top 10 stolen cars are model year 2002 or newer. This means they likely do not have an actual cash value, the amount you’d be reimbursed for a loss once your auto insurance deductible is satisfied, high enough to bother to pay for the coverage.

What type of coverage do I need?

There are several types of coverage—liability coverage does not cover theft of the vehicle.

Coverage for theft of a motor vehicle falls under the comprehensive “cause of loss” on an auto insurance policy. This means you’d be out of luck if you purchased a liability-only auto insurance policy, which doesn’t include any coverage for physical damage to your vehicle.

You would simply have bodily injury liability coverage and property damage liability you negligently cause to others.

Car insurance usually doesn’t cover theft inside the vehicle. Personal property is protected by homeowners and renters policies.

Another common misconception is that collision coverage may pay for all “losses” to your vehicle, including vehicle theft. This is also not the case.

Collision pays for additional damages in the event of an auto accident. Neither liability nor collision coverage protects against vehicle theft. So, if you’re looking for a policy that covers stolen vehicles, you should be looking for a comprehensive policy.

But even though comprehensive covers vehicle theft, it only covers the car itself, and not personal items left inside. Therefore, you’ll need to file a claim with your homeowners or renters insurance carrier.

Be prepared to make two different insurance claims, one for the car itself, and one for the personal items that were inside the car.

Read more about the difference between collision and comprehensive coverage if you are not clear on the topic.

Tip: You may be surprised to discover that damage caused to your vehicle by animals (even if you “collide” with one) is covered by comprehensive coverage…not collision coverage. This is an important fact if you live in deer country, where hitting a deer with your car can be a common problem. In fact, collisions occur an estimated 1.6 million times per year! Go ahead and read that again.

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Is comprehensive coverage worth the cost?

It sure is if your car is newer, but as discussed above, the most frequently stolen vehicles are “older” and not terribly valuable. Honda’s 1994 Civic tops the list. Kelly Blue Book estimates the value of this vehicle, with 100,000 miles on it, at a little under $3,000 in good condition and under $2,000 in fair condition – your insurer might believe the vehicle’s value to be much lower, especially as the mileage racks up.

Let’s assume you’re 19 year-old Honda Civic is in fair condition. Perhaps you purchase comprehensive coverage with a $250 deductible as part of your overall policy at a cost of $50 per year.

The maximum amount of money you would receive from your insurer if your vehicle is stolen may be $1,750. This is your $2,000 actual cash value, minus your $250 deductible. If your vehicle had 150,000 miles on it, this value may be as little as $1,200, which would net you $950 (after deductible) if your vehicle were stolen.

Does this make financial sense? Probably not. Assuming your car isn’t stolen every year, or the first year you paid for the coverage, that $50 coverage cost rises to a total of $100 after two years, $150 after three years…and so on. All while your car’s actual cash value is steadily decreasing, which means your insurer will offer to pay less if the car is stolen.

Tip: If you have a loan or a lease, your lender or financing company will require this coverage to protect their interest in your property.

No way to win?

Not really, when it comes to the unavoidable numbers in the example cited above. Your best bet is try to avoid having your car stolen in the first place, as insurance coverage is not really an “answer” to this problem.

Make sure to park in your garage (if you have one), or a well-lit area if possible and always keep the windows rolled up and the keys out of the ignition.

We’d recommend installing a car alarm or anti-theft device, but just as the increased insurance premium associated with adding comprehensive coverage may not make sense, the expense to install an alarm could be the same catch-22.

However, if your car is stolen, you should call the police and file a report immediately. The police will ask for basic information such as the make and model, vehicle identification number, and plate number. Then contact your insurance company to check if you have enough coverage. If any personal items were left inside the car, then you should also call your homeowners or renters insurance provider.

When shopping for car insurance, discuss the option of comprehensive coverage in detail with your insurer or insurance agent. They may be able to assist you with the decision, but ultimately, the choice to add the coverage will fall into your lap.