Car Insurance Won’t Cover Items Stolen From Vehicles (But This Will)

When her car was vandalized and her wallet, sunglasses, cell phone and other items were stolen from the vehicle, Nichole Richardson figured her car insurance policy would cover it. However, after much back and forth with her insurer, she learned car insurance doesn’t apply to stolen property. 

“I was very surprised and shocked,” says Richardson, whose name was changed to protect her privacy. “I thought full coverage meant… well, full coverage.”

Turns out, she did have coverage for the items taken from her vehicle — but it was through her home insurance. 

“For three months, I’m just tearing my hair out, and I’m having to pay two deductibles for one situation,” Richardson says. “[It] was a huge eye-opener for me.” 

Richardson’s story isn’t unique. In fact, a recent study by Trusted Choice proves it. Around 86 percent of policyholders claim to have a strong understanding of what their insurance covers — but when asked specific coverage questions, many were incorrect or unsure. Forty-four percent believe items stolen from vehicles are covered by a car insurance policy, which is incorrect. Home policies, along with renters and condo policies, cover items stolen from vehicles. Insurance is an integral tool for protecting your hard-earned money, but misunderstanding what your policy covers could cost you. Here are some of the most common misconceptions about what home and auto insurance policies actually cover.

The most common misconceptions about insurance

Getting familiar with your car and home insurance policy limitations could spare you from dipping into your own pocket to pay for losses or damage. Below, we’ve rounded up some of the most common insurance myths and ways to fix coverage gaps. 

You don’t automatically have flood insurance

Myth: Home insurance covers floods. 

Fact: Flood damage is excluded from standard policies. 

Fix: Purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private provider. 

Although floods are the most frequent type of natural disaster, flood damage won’t be covered by your home insurance policy. The only way to be financially protected from a flood is to carry a flood insurance policy, which you can buy from the government-backed NFIP or through a private insurance company. 

NFIP policies are capped at $250,000 in dwelling coverage and $100,000 for personal property. On average, a policy from the NFIP will cost you around $800 per year. If you need higher coverage limits than the NFIP offers, you might consider getting your policy from a private provider. However, higher coverage limits usually result in higher rates.

Home insurance doesn’t always cover burst pipes 

Myth: When a pipe bursts, my homeowners policy will cover the damage. 

Fact: Home insurance covers sudden, accidental water damage — not damage stemming from neglect. If an adjuster finds that the pipe burst because of homeowner neglect or improper maintenance, your claim may be denied. 

Fix: Take steps to maintain your pipes. Get them checked by a plumber if you suspect something is wrong, and consider insulating pipes prone to freezing. When leaving home for a longer stint during winter months, keep your heat on high enough so that your pipes don’t freeze and burst. 

Water damage is something of a gray area in home insurance. While floods and sewer backups are not covered, sudden and accidental water damage — like what you’d see with a burst pipe — is included in your policy. But, there’s an important caveat: Water damage is only covered if a homeowner takes the proper steps to maintain their home. 

If, for instance, you leave your home for a weekend ski trip, turn the heat off and return to a burst pipe, this could be seen as homeowner neglect, and your insurer would likely deny your claim. 

Insurance also won’t cover leaky pipes, even if those leaky pipes lead to a burst. Remember, home insurance covers sudden water damage, not things that have built up over time. 

Auto insurance generally follows the car — no matter the driver

Myth: When you borrow someone else’s car, your car insurance policy covers you. 

Fact: When you borrow someone else’s car, you are primarily covered under their car insurance policy, not your own. 

Fix: Before you get behind the wheel, ask your friend about their car insurance policy details. 

Technically speaking, car insurance policies follow the car, not the driver. So, if you’re borrowing a friend’s car and get into an accident, your friend’s policy will kick in first to cover the resulting damage. In the case of a serious accident that exhausts your friend’s car insurance policy limits, your car insurance policy will help cover outstanding expenses. 

Notably, if your friend’s car insurance policy covers the entire cost of the accident, their insurance company may go to yours to collect damages. Either way, your friend’s insurance premium could increase upon renewal, as their vehicle is no longer incident-free. However, because you were the at-fault driver, you are likely to see a steeper policy surcharge and higher insurance expenses for years down the road. 

You are covered in a rental car

Myth: When I drive a rental car, I need to purchase insurance from the rental company. 

Fact: Your personal car insurance policy covers you in a rental car, but in some scenarios, you may want to buy extra coverage. 

Fix: Review your policy and get familiar with your coverage types and limits. If you have lower liability limits and lack comprehensive and collision coverage, consider adding coverage through the rental company. 

Rental cars are the exception to the rule that insurance policies follow the car, not the driver. When you drive a rental car for personal — not business — use, you should be covered by your policy. But if you rent a car for a work trip or while traveling abroad, your policy won’t cover you. 

If you have full coverage, meaning you carry both comprehensive and collision insurance, you likely don’t need to purchase more coverage from the rental car company. One exception could be a collision damage waiver. If you add this coverage type, you are off the hook for paying for a rental vehicle’s accident-related repairs, excluding the deductible. In many cases, the collision damage waiver deductible is around $500, while your personal policy deductible could be much higher. Therefore, adding the collision damage waiver could help lower your out-of-pocket costs if you’re in an accident. 

Not all car insurance policies cover theft 

Myth: If I have car insurance, I’m covered if my vehicle is stolen. 

Fact: Liability-only car insurance does not cover theft. To be financially protected if your vehicle is stolen, you’ll need comprehensive coverage. 

Fix: Adding comprehensive coverage, which is included in full coverage policies, can help if your vehicle is stolen or vandalized. 

Comprehensive coverage isn’t required by law in any state. However, without it, you’re out of luck if your vehicle is stolen — insurance won’t cover it. Note that if you’re financing your car, you’re likely safe. Lenders and lessors typically require comprehensive coverage as a term of the loan or lease.

Your car insurance policy excludes business use 

Myth: If I use my vehicle for a business purpose and I get into an accident, I’m covered under my personal auto policy. 

Fact: When you use your vehicle for a business reason — maybe you’re a real estate agent driving a client to a new home — and you get into an accident, you aren’t covered by your personal auto policy. You may need to pay for damages out of pocket. 

Fix: If you occasionally use your vehicle for work purposes, check if your insurance company offers what’s called a business use endorsement. Or, if you frequently use your car for work, ask your employer about their commercial auto policy. 

When you commute to an office, you are covered by your personal auto insurance policy. However, when you run business errands, like meeting clients or vendors, your personal policy may not cover you. So, if you rear-end someone while driving to a client lunch, you’re likely on the hook for accident-related expenses. 

Real estate agents, contractors and other professionals who frequently use their personal vehicles — not designated commercial or work cars — for business purposes may want to consider a business use endorsement to ensure they’re covered no matter the reason they’re on the road. 

You’re covered by Uber or Lyft  

Myth: When I drive for Uber, Lyft or another rideshare company, I’m completely covered by that company’s insurance policy. 

Fact: When you’ve turned your rideshare app on but don’t yet have a passenger in your vehicle, you are not covered by your personal policy or the rideshare company’s commercial policy.

Fix: Adding a rideshare endorsement can help fill in the gap where your personal policy ends and the commercial policy begins. 

Think of rideshare driving in multiple phases: 

• Phase 1: You’re in your car with the rideshare app turned on, looking for a passenger.
• Phase 2: You accept a new passenger and drive to pick them up.
• Phase 3: The passenger is in your vehicle, and you drive them to their destination. 

Once you have a passenger in your vehicle (phase 3), you’re usually covered by the rideshare company’s commercial policy. But, when you’re on the clock seeking a passenger (phase 1) or en route to pick one up (phase 2), which policy covers what is less clear. If you’re in an accident during that time, you may not be covered by either policy. Adding a rideshare endorsement can increase your car insurance costs, but the added financial protection may be worth it for some drivers. 

Bottom line

Realizing the limitations of your home and auto insurance policies is crucial to avoid unexpected out-of-pocket expenses. To remedy gaps in coverage, experts recommend reviewing your policy carefully and speaking with your insurance provider to fully understand your coverage and make any necessary adjustments.