Coverage is key to recovering from car theft

Robert DiGiacomo

If you end up as one of the nearly four in 10 Americans whose stolen car isn't coming back, you'll want to have been prepared by purchasing “other than collision” coverage -- also known as comprehensive coverage -- for your vehicle. As with any type of insurance, the keys are knowing what you're buying and ensuring the coverage will meet your needs if you have to file a claim.

“Ask your insurance agent or insurance company representative 'what if' scenarios to determine how their claims process would work and how much out of pocket you would be responsible for in the event your car is stolen,” says Joel Ohman, a certified financial planner and founder of CarInsuranceComparison.com.

Thefts are down, but many cars never found

The number of vehicle thefts in the United States has dropped significantly over the past decade –– from nearly 1.2 million in 2000 to more than 737,000 in 2010. But the recovery rate hasn't improved as much: 62 percent of stolen cars were recovered in 2000, down from 56 percent in 2010, according to the nonprofit National Insurance Crime Bureau.

Getting your BMW or Honda Accord back depends largely on whether the crooks were professionals –– who will quickly move the stolen vehicle to a chop shop –– or amateurs out for a joy ride, says Terry Tadlock, president of Coastal Plains Insurance in South Carolina.

“As a general rule, if it's not recovered in 72 hours, it's not going to be recovered,” Tadlock says. “If it's stolen by kids, the car will be recovered quickly.”

Is theft coverage needed?

For a new car, coverage to guard against theft is a no-brainer. But as your vehicle ages, consider the “risk and reward” factor -- whether its value warrants paying the higher premium, Tadlock says.

Once a car hits the seven-year mark, the cost of an auto insurance premium that includes collision coverage might not be justified, based on the "book value" of the car, he says.

Also, remember that comprehensive coverage doesn't apply to any cellphones, wallets or other personal items stolen from your car; the loss of those personal belongings comes under a homeowner's or renter's insurance policy.

In most cases, the bank or other institution that carries your auto loan will require you to buy a certain amount of collision coverage. If you're not financing your car, collision coverage is optional.

Determining your vehicle's worth

Insurers pay claims based on actual cash value, which factors in depreciation of a vehicle, or  stated or agreed value policy, according to Greg Jones, vice president of claims at Chartis' private client group.

Under actual cash value (ACV), you'll pay a lower premium, compared with a stated value plan, but the value of your vehicle if it's stolen will continue to drop as it ages.

“Once you move a new vehicle off the lot, it depreciates,” Jones says. “Even your brand new Lexus that you take off the lot, if it has 15,000 miles in the first year, will have significant depreciation in an ACV policy.”

The actual value policy likely will cost more than an ACV policy but offers a “peace-of-mind premium” with a guaranteed payout if the vehicle is not recovered, Jones says.

Such policies are favored by collectors who want to ensure their investment in a $2 million special-edition Bugatti Veyron, but owners of “routine $30,000 vehicles” also buy this coverage, Jones says.

How are rates determined?

If you drive a car in Fresno, Calif., Spokane, Wash., or the San Francisco area -- which ranked first, fourth and ninth, respectively -- on the National Insurance Crime Bureau's 2010 list of "hot spots" for auto theft, you could end up paying a higher rate for coverage.

Premiums are based on crime rates where you live, whether your car is popular among thieves, how old it is and what condition it's in, according to Tadlock.

Although newer, more valuable cars typically will command a higher insurance premium, the most recent models aren't necessarily the most likely to be stolen, because of the value of the parts of older models, the crime bureau reports.

The 1994 Honda Accord in 2010 ranked first on the list of most frequently stolen vehicles, followed by the 1994 Honda Civic and the 1991 Toyota Camry, according to the crime bureau. The newest model on the top 10 was the 2004 Dodge Ram.

Filing a claim

If your vehicle is stolen, you must file a police report before contacting your insurer. If police fail to recover it and you file a claim, your insurer will determine the payout, according to Tadlock.

Under ACV policies, the final figure takes into account your car's book (or market) value, as well as other factors, such as mileage, the age of tires and whether repairs have been done recently. Most states require claims to be paid in 60 days, according to Tadlock.

Your premium probably won't go up from one claim, but “if there are multiple claims or claims are severe, it will impact future premiums,” Tadlock says.

Preventing theft

The National Insurance Crime Bureau suggests four "layers of protection" to guard against theft.

1. Employing "common sense" tactics, such as removing keys from the ignition, closing windows, locking doors and parking in brightly lit areas.

2. Using deterrents that would-be thieves can see or hear, such as steering column collars, alarms, wheel-brake pedal locks and theft deterrent decals.

3. Making sure you have devices, such as so-called smart keys with computer chips, that prevent a car from being hot-wired.

4. Having a tracking device installed that will send a signal to police or a security service if a vehicle is stolen.

The use of anti-theft devices may qualify for a policy discount from Allstate, State Farm and other auto insurers.

Free Insurance Quotes