Does Auto Insurance Cover Car Theft? You May Be Surprised at the Answer

by Christy Bieber | Published on Sept. 7, 2021

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A man is attempting to break into a vehicle.

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Don't get caught off guard by not having the essential coverage.

Car thefts are a serious risk in some parts of the country. And if a car is stolen, there's a very good chance that the owner will not get the vehicle back and will have to buy a replacement. Even if the rightful owner is reunited with their vehicle, it may have sustained a lot of damage or may have been stripped of parts.

Some drivers may assume their auto insurance will cover all of these costs associated with car theft. But the sad reality is that this is not always the case. Depending on what insurance the policyholder chose to purchase for their vehicle, it's possible that there would be no coverage for car theft at all. In those circumstances, drivers would be left to cover all losses out of pocket.

Here's why auto insurance doesn't always cover car thefts and why drivers need to know how much car insurance they really need.

Minimum required coverage isn't as comprehensive as drivers think

Drivers may not have coverage for theft of their vehicles if they made the decision to purchase only the minimum amount of coverage required in their state.

In most parts of the United States, motorists are only required to buy liability insurance. Liability insurance is a type of protection for accident victims. If the insured policyholder causes a crash and hurts others or damages their property, then liability insurance pays for losses experienced by those harmed in the crash.

Liability insurance doesn't actually provide any protection for the driver of the car or for the driver's vehicle. If a driver wants their own car to be protected against losses, they will need to buy additional protection beyond what is required.

Specifically, if a motorist wants their insurance to cover the replacement or repair of their vehicle after a car theft has occurred, the driver is going to need to buy car insurance with comprehensive coverage. That's the kind of insurance that pays for losses resulting from something other than a crash the driver causes -- including car theft.

Motorists have to pay extra for comprehensive coverage, but it is generally worth the cost. That's because very few people could afford to pay for all of the losses associated with car theft if they didn't have help from an auto insurance provider. And drivers may not have a choice about whether to buy this coverage if they have a leased or financed vehicle, as lenders and leasing companies usually mandate drivers have comprehensive protection.

Drivers should not only make sure they have comprehensive insurance but should also ensure their policy limits are high enough. And if they have a new vehicle, they should know that they'd only get the fair market value of the car -- not necessarily enough to purchase a brand new one or to pay off their car loan. So new car replacement coverage could be a good add-on. Or they may need gap insurance which pays the difference between the outstanding car loan balance and what the car is worth.

It's important for motorists to not get caught off guard by finding out too late they don't have the coverage they need. Drivers should research different types of insurance coverage and read their policies carefully to make sure they've purchased protection for theft and other disasters.

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