For many of us, owning a car is more than just a convenience; it’s a necessity. But what happens if your car is stolen while you’re still making payments on it? Will your insurance cover the cost of your loan? If you’ve found yourself wondering about this scenario, don’t worry—we’re here to break it down for you.
This guide will cover how car insurance works in theft cases, the role of gap insurance, and steps you can take to protect yourself financially. Let’s help you prepare for the unexpected.
Does Insurance Cover a Stolen Car?
Most auto insurance policies include different levels of coverage, and whether your policy covers a stolen car depends on the type of insurance you have. Here’s the breakdown:
Comprehensive Coverage is Key
To get compensated when your car is stolen, you’ll need comprehensive coverage included in your auto insurance policy. This type of insurance specifically covers incidents beyond accidents, such as theft, vandalism, natural disasters, and fire.
If you only carry liability insurance—which is the state minimum in most cases—your car theft won’t be covered. Liability insurance only pays for damages or injuries you cause to others.
What Does Comprehensive Coverage Pay For?
If your car has been stolen and cannot be recovered, comprehensive coverage will typically pay for the actual cash value (ACV) of the car at the time it was stolen. ACV is the market value of the car minus factors like depreciation. For example, if your car was worth $15,000 new but has depreciated to $10,000 at the time of theft, the insurer will reimburse you for $10,000 (minus your deductible).
However, here’s the catch: this payment goes toward replacing the car, not necessarily paying off your loan.
What About My Car Loan?
This is where things can get tricky. When you finance a car, the loan balance you owe may not always match the car’s actual cash value. Cars depreciate quickly, especially in the first few years, and you could end up owing more than your car is worth.
If the ACV Is Less Than Your Loan Balance
If the reimbursement from your insurance only covers the actual cash value of your car but doesn’t satisfy your loan balance, you’re still responsible for paying off the remaining loan amount. This means you’re essentially paying for a car you no longer have.
For example, if your stolen car’s actual cash value is $10,000 but you owe $12,000 on your loan, you would need to pay the remaining $2,000 out of pocket unless you have additional protection.
Here’s Where Gap Insurance Can Help
The best way to protect yourself from this financial gap is through gap insurance. GAP stands for “Guaranteed Asset Protection.” This type of insurance is designed to cover the difference between the actual cash value of your car and the amount you owe on your loan.
With gap insurance, if your car is stolen, you won’t have to worry about paying that extra $2,000 in the example above. Gap insurance ensures your entire loan is taken care of, so you can breathe easy.
Some lenders require you to have gap insurance when financing a car, but even if it’s not required, it’s often worth considering.
Steps to Take If Your Car Is Stolen
Finding out your car has been stolen can be overwhelming, but acting quickly and following these steps can help speed up the resolution process:
- File a Police Report
Report your car theft to the police immediately. Provide as much detail as possible, including the make, model, year, color, and VIN (vehicle identification number). You’ll need the police report to file a claim with your insurer.
- Notify Your Insurance Company
Contact your insurer to report the theft and start a claim. Be ready to provide the incident details and a copy of the police report.
- Contact Your Lender
If you’re still paying off your car loan, notify your lender about the theft. They may be able to guide you on next steps or provide additional information about your loan coverage.
- Check the Terms of Your Policy
Review your insurance policy to confirm you have comprehensive coverage and understand how much of your loss could be reimbursed.
- Consider Gap Insurance (If You Don’t Already Have It)
If you don’t have gap insurance and your loan exceeds the car’s ACV, talk to your lender or insurer to explore your options. This may include negotiating loan payments or special repayment plans.
Tips to Protect Yourself Financially
While car theft is always a possibility, there are ways to minimize financial risk and ensure peace of mind:
- Invest in Comprehensive Coverage: Make sure your auto insurance includes comprehensive coverage to protect against theft and other non-collision incidents.
- Add Gap Insurance: If you owe more on your loan than your car is worth, gap insurance is essential.
- Secure Your Vehicle: Reduce the likelihood of theft by parking in well-lit areas, using anti-theft devices, and never leaving your valuables or keys in the car.
- Regularly Review Your Policy: Stay informed about what your policy covers and make updates as needed.
Don’t Get Caught Off Guard
A stolen car is stressful, especially if you’re still paying off a loan. But by understanding your insurance policy and adding protections like gap insurance, you can reduce financial strain if the unexpected happens.
Delgado’s Insurance: Dependable Insurance in California
If you need dependable and affordable insurance in the Golden State, look no further than Delgado’s Insurance.
We have locations in Riverside, California, and Bloomington, California. Get in touch today by telephone (951-361-0084, 909-421-9003), email (mail@delgadosinsurance.com), or through our social media accounts (Facebook, Twitter and LinkedIn)!
