Does Car Insurance Cover Theft?

Just take a moment and think about what you’re going to do if your car gets stolen, and you’re unable to recover it. Whether you’re financing the car on loan or you’ve purchased it in full, you could be left facing a hefty financial loss. 

The most effective way to secure your car is to have it insured. But the question is, does car insurance cover theft? Well, the good news is, yes, car insurance does cover theft, but only with certain coverages like comprehensive coverage gap insurance coverage. 

While these two optional coverages provide financial security for car theft, they cover your car in two different ways. So, that’s why it’s essential to understand how your car insurance covers theft, and what coverage you need to have for adequate protection.  

In this guide, you will learn:

• Whether liability insurance covers car theft 
• Which types of car insurance actually protect you against theft 
• How insurance handles stolen cars, stolen parts, and items taken from your vehicle 
• How much insurance will pay if your car is stolen 
• What to do if your theft claim is denied 
• Is auto theft coverage legally required

Does Liability Insurance Cover Car Theft?

No, liability insurance does not cover car theft. It only pays the other person’s medical bills, vehicle repairs, and property damage when you are at fault in an accident; it does not cover your own stolen car. 

If you only carry liability coverage and your car is stolen, your auto insurance policy will not reimburse you. In that case, you would have to absorb the entire financial loss yourself, whether that means buying a replacement vehicle or continuing to pay off a remaining auto loan. 

If you want your auto insurance policy to cover car theft, you will need the right coverage. So, to stay financially protected, it’s important to explore affordable auto insurance coverage from a reliable insurance provider that includes comprehensive protection.

What Type of Car Insurance Covers Theft?

Only two specific types of car insurance coverage cover car theft, which include comprehensive coverage and gap insurance coverage. While comprehensive coverage is mainly essential to cover a stolen car, gap insurance pays the outstanding debt amount.   Here’s a detailed breakdown to help you understand how you can secure your car against theft with these two essential coverages.

Comprehensive Car Insurance Coverage

Comprehensive car insurance coverage is a special type of car insurance coverage that’s designed to protect your car from theft, vandalism, natural disasters, and other unexpected events that are beyond your control. 

If your car is stolen and later recovered, comprehensive insurance will pay for the damage caused by the theft. If the vehicle is not recovered, it will reimburse you for your car’s actual cash value (up to your policy limits), after you pay your deductible.  

If you want to get reimbursed at replacement value, i.e., the brand-new price of your car, you can consider adding the new car replacement coverage add-on for an additional premium.

Gap Insurance Coverage

Gap insurance is an optional add-on that works alongside comprehensive or collision coverage. It is mainly useful if you have financed or leased your vehicle, because it helps cover the difference between what your car is worth and what you still owe on your loan. 

Since cars depreciate quickly, your insurance payout after a total loss or theft may be less than your remaining loan balance. Gap insurance pays the gap between your car’s actual cash value and the amount you still owe, so you are not stuck paying for a vehicle you no longer have. 

Here’s an example: 
Suppose your car is stolen and never recovered. Your comprehensive insurance determines that the car’s actual cash value is $20,000, but you still owe $25,000 on your auto loan. Comprehensive coverage will pay the $20,000, and gap insurance will cover the remaining $5,000, so you don’t have to pay that balance out of pocket.

How Does Car Insurance Cover a Stolen Car?

When your car is stolen, different parts of your insurance policy may apply depending on what was taken, whether it's the entire car, specific car parts, or personal belongings inside the car. Each of these situations is handled differently under an auto insurance policy. 

Understanding how theft claims work in each case will help you know what is covered, what isn’t, and how much financial protection you actually have.

Theft of Car

If your car gets stolen, your auto insurance policy will cover the financial loss due to theft if you have comprehensive coverage. If your car is recovered, the comprehensive coverage will pay for its repair expenses, which commonly include broken windows, damaged locks, or vandalism.  

If your car is not recovered, your comprehensive insurance coverage will reimburse your car based on its actual cash value up to your coverage limit. However, if you don’t have comprehensive coverage, your auto insurance won’t cover the loss due to car theft.

Theft of Car Parts

Your comprehensive car insurance coverage just doesn’t cover the entire car; it also covers individual car parts. Often, thieves resort to stealing certain car parts, as it's quicker and easier to open accessible parts and get away.  

Another reason is that even car parts have a high demand, which are often sold at a good price, depending on the car’s make and model. Car parts such as catalytic converters, airbags, tailgates, headlights, and tail-lights, along with batteries, GPS, even tires and wheels, are often stolen. 

If you have comprehensive car insurance, your auto insurance policy will cover these parts, and other parts of your car as well, including the engine. So, if any of these parts get stolen, you can use the comprehensive coverage to get a replacement up to your coverage limit after paying your deductibles.

Theft of Personal Items from Your Car

If your personal belongings, such as your laptop, phone, wallet, or bag get stolen from your car, your auto insurance won’t cover it. Even the comprehensive auto insurance coverage is specifically limited to the car, so it won’t cover any part or item that’s not permanently attached to the vehicle. 

Typically, the auto insurance policy itself is designed to financially secure your car, not your personal items. So, if you’re considering covering your personal items, you should explore renters or homeowners’ insurance policy.

How Much Will Insurance Pay for a Stolen Car?

The amount that your car insurance will pay for your stolen car depends on the type of coverage you have and your policy limits. If you only have comprehensive coverage, your auto insurance policy will reimburse your car’s actual cash value (ACV), the vehicle’s market value at the time it was stolen. 

If you have add-ons like new car replacement coverage and gap insurance, your protection can be much higher. New car replacement provides a brand-new equivalent vehicle, while gap insurance pays the difference between your loan balance and your car’s ACV. 

Here’s an example:

If you purchased your car for $35,000 and after two years its value has depreciated to $30,000, standard comprehensive insurance would reimburse $30,000 (minus your deductible) at actual cash value. 

On the other hand, if you also have new car replacement coverage, instead of receiving $30,000, your insurer would provide a brand-new replacement vehicle of similar make and model. 

Now assume the car was financed, and you still owe $35,000. 
Comprehensive insurance would pay $30,000, and gap insurance would cover the remaining $5,000, so you would not have to pay that balance out of pocket. Without gap insurance, you would owe that $5,000 out of pocket.

How to Claim Car Insurance for a Stolen Car?

If your car has been stolen or if it’s missing parts, it is recommended that you claim your auto insurance policy immediately or as soon as possible. Before claiming auto insurance for a stolen car, it is essential to report your car theft to the police and review your policy to ensure that you have comprehensive coverage. 

Without comprehensive insurance, an auto insurance claim for car theft will be denied, since this is the coverage that handles theft-related losses. Add-ons like gap insurance or new car replacement only apply if comprehensive coverage is already in place.

• If you do have comprehensive coverage, here’s what you need to do to file a theft claim and get reimbursed for your stolen vehicle. 
• Report the theft to the police and obtain a police report number 
• Notify your insurance company as soon as possible 
• Provide details about the theft, including the date, time, and location 
• Submit required documents such as the police report, vehicle registration, and loan or lease information 
• Allow your insurer to investigate and verify the theft 
• If the car is recovered, redeem coverage for the repair expenses if there any damages due to the theft  
• If the car has not been recovered, your auto insurance policy should reimburse your car’s ACV, or RCV depending on your coverage, and its limits

What to Do if Your Car Theft Claim is Denied? 

A car theft claim can be denied for several reasons, such as not having comprehensive coverage, failing to file a police report, inconsistent information, or questions about how the theft occurred. In some cases, insurers may also investigate further if they suspect possible fraud or misrepresentation. 

If your claim is denied, start by carefully reviewing the denial letter and your policy to understand the exact reason. If you believe the decision is incorrect, gather any supporting evidence, such as surveillance footage, witness statements, or location data, and submit a formal appeal to your insurance company for a review. 

If the insurer still refuses to approve a valid claim, you can file a complaint with your state’s Department of Insurance. They can review the case, ensure the insurer follows the law and policy terms. So, if your claim is valid, your insurer is bound by law to process it and provide coverage for the car theft.

Is Auto Theft Coverage Legally Required?

No, theft coverage isn’t legally required. So, it’s up to you to decide whether you should add comprehensive coverage, or add-ons like gap insurance, or new car replacement coverage to your auto insurance policy. 

However, as car thefts are very common in the U.S., it is essential to have adequate auto insurance coverage to protect yourself financially against a car theft. According to the Insurance Information Institute, and NHTSA, here are the car theft records in recent years. 

• 2020: 880,595 car thefts 
• 2021: 932,329 car thefts 
• 2022: 1,008,756 car thefts  2023: 1,020,729 car thefts 
• 2024: 850,708 car thefts 

Even if your car has an advanced anti-theft security system, or it's parked in a secure garage with surveillance cameras, and alarms, there’s always a risk of car theft. While these anti-theft systems reduce the risk of car theft, its not always possible to prevent it.  

So, if you want to protect your car financially, it is crucial to consider getting adequate comprehensive insurance and other add-ons.

The Bottom Line: Maintain the Right Coverage to Keep Your Car Protected

There’s always a substantial risk of car theft regardless of where you’re located. This makes it essential to ensure maintaining the right coverage to keep your car protected against car theft, vandalism, and other unexpected situations that are beyond your control. 

Whether you need comprehensive coverage or other essential add-ons like gap insurance, new car replacement coverage, or classic car insurance, you can contact us for a free quote to build an auto insurance policy that provides the best anti-theft protection.

Frequently Asked Questions (FAQs)

Do insurance pay out for a stolen car?

Yes, insurance will pay out for a stolen car if you have comprehensive coverage. It typically reimburses the car’s actual cash value after your deductible, and add-ons like gap insurance or new car replacement can increase the payout.

Is theft included in full coverage insurance?

Yes, full coverage generally includes comprehensive insurance, which covers car theft along with vandalism, weather damage, and other non-collision losses.

How does car theft work with insurance?

If your car is stolen, you can file a claim under comprehensive coverage. After a police report and investigation, your insurer pays for repairs if the car is recovered or reimburses its actual cash value if it isn’t.

What proof do I need for a theft claim?

You typically need a police report, proof of ownership, and details about the theft. Insurers may also request photos, surveillance footage, or other supporting documents during their investigation.

Does your car insurance go up after a theft claim?

Yes, a car theft claim may increase your premium at renewal because insurers view it as a higher risk, though the impact is usually smaller than at-fault accident claims.