Will Auto Insurance Cover You if Your Car Is Stolen?

Car thefts are on the rise. In fact, there was a 7% increase in vehicles stolen in 2022 compared to 2021. And the number of vehicles stolen surpassed 1 million for the first time since 2008.

With so many cars being stolen, it's important for drivers to understand what the rules are for when auto insurance will cover a vehicle taken by a thief. After all, if auto insurance doesn't pay, the car's owner could find themselves with a lot less money in their checking account after they're forced to cover the losses out of pocket.

When does auto insurance cover a stolen car?

Car insurance will provide coverage for a stolen car only if the vehicle's owner has purchased optional coverage for this type of situation.

See, most states only require liability coverage, which only pays claims if the policyholder harms others. A different type of insurance would be necessary to pay to replace the policyholder's own vehicle if it was stolen. This type of insurance is called comprehensive coverage.

Comprehensive coverage pays claims whenever the policyholder experiences covered non-crash losses such as damage from vandalism, falling objects, or windshield chips and cracks. It also pays for stolen vehicles, up to the policy limits.

Comprehensive coverage is typically optional, although if a driver has a car loan or is leasing a car, then the lender or lease provider would generally mandate that this insurance coverage be purchased.

When a comprehensive policy is put into place, it will pay for the fair market value of the vehicle, minus any deductible that applies. Since this can be less than the amount owed on the car (due to the fact cars often depreciate in value more quickly than a loan can be paid down), vehicle owners with a car loan may also want to buy gap insurance. That would cover the difference between the fair market value and the amount outstanding on the loan.

With gap insurance and comprehensive coverage, drivers could ensure the losses they incur out of pocket are limited to their deductible and anything extra they want to pay to replace their old car with a new one.

Make sure to have the right auto insurance coverage in place

Without comprehensive coverage, a driver could be left with no insurer to turn to if their car is stolen. If it is never recovered, they'd be out all the money for the vehicle -- and would still have to pay any outstanding balance on the car loan. They'd get no help from an insurer to replace the car, either.

Most people can't afford to just pay off a loan for a stolen car and buy a new one out of their bank account. As a result, drivers should not go without comprehensive coverage -- even if there is no lender requiring it. Once the car theft has already occurred, it will be too late to add coverage after the fact so don't wait to sign up for a comprehensive policy.

Drivers can call their current auto insurers to ask if they have this protection (or can check their policy contract). Any driver without it should seriously consider adding it before something goes wrong -- especially with auto thefts on the rise.