Does Liability Insurance Cover Theft?
Liability insurance is an umbrella term describing many types of insurance such as personal liability, business liability, car and property insurance, and more. All liability insurance policies provide protection against expenses and claims including injuries and damage to other people or property that you’re legally liable for
Since we live in a busy world where, unfortunately, incidents and accidents do occur, it is not only important to understand what liability insurance is, but also what it will cover. Most liability insurance companies will offer very similar packages but there are differences in premiums and coverages that one should pay attention to and make sure these really fit one’s needs.
For example, liability insurance doesn’t cover one’s own injuries or damaged property. It only applies in situations where the insured is legally responsible for someone else’s damages. It’s also important to know if liability insurance covers theft.
Liability insurance is required in some instances. For example, most states have minimum liability insurance requirements for drivers operating a vehicle. Some businesses are also required to carry liability insurance, depending on their industry and any certifications they may carry. Homeowners and renters are mostly required to acquire insurance for their property.
Thus, it’s clear that proper liability coverage is important.
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Does Liability Insurance Cover Theft?
No, liability insurance does not typically cover theft. Its primary function is to protect the insured against costs and claims from damage to others – not the insured themselves.
Similarly, liability insurance won’t cover a stolen vehicle. Collision coverage won’t protect the insured from theft either.
What Insurance Covers Theft?
There are, however, several insurance products that do cover theft.
Comprehensive Car Insurance
Comprehensive coverage helps cover theft or damage to one’s car that is not caused by a collision. Such insurance typically covers vandalism, falling objects (such as hail or a tree branch), or water damage.
Comprehensive insurance usually helps cover theft of the car itself, stolen car parts, or damage caused by a break-in, such as broken windows or damaged door locks. Comprehensive coverage is required by a lender or financial institute when leasing or financing a vehicle. If the car is fully owned, comprehensive coverage is optional.
Of note is that there is a common misconception that one must carry “full coverage car insurance” to be insured against auto theft. Although there’s not technically a full coverage insurance product, many lenders define full coverage as including both comprehensive and collision on the policy. In most cases, one can purchase comprehensive coverage separately from liability or collision coverage; it typically costs less and protects from theft.
Homeowners Insurance
Homeowners insurance is a specific type of property insurance and covers damage or loss by theft. It also protects against emergencies such as fire and storm damage, and may protect homeowners from accidental injury or death for which they may be legally responsible. For example, someone falls on your slippery doorstep, water damage that seeps into the neighbor’s house, roof damage that includes the roof next door, etc.
Mortgage lenders usually require homeowners’ insurance as part of the mortgage terms. A standard homeowners’ insurance policy is divided into several parts of coverage, including:
- The structure itself,
- Other structures such as sheds and fences,
- Personal property within the insured structures,
- Loss of use
- Personal liability in case of injuries or accident, and
- Medical payments to others.
The loss calculation and pay-out will depend on the type of coverage. For example, if the insurance policy included replacement cost coverage, stolen items are usually covered for the amount it costs to repair or replace them, minus the deductible.
Generally, the total replacement coverage for personal property at home is typically between 50% to 70% of the overall limit of the policy covering the structure of one’s home. Personal property coverage, including theft, typically extends to all related family members in the home.
Something that’s generally not known is that personal property coverage usually also protects personal items away from the home, such as things stolen from your car. Keep in mind that items kept in the car, camper, or otherwise away from your home may have a lower coverage limit.
Commercial Property Insurance
Among small business retailers, 56 percent reported theft in 2022, according to a survey by the U.S. Chamber of Commerce. The survey reveals that 53 percent of small business owners say the problem is getting worse.
Commercial property insurance protects a small business against such burglaries and theft. It also protects small businesses’ physical assets from fire, explosions, burst pipes, storms, and vandalism. Earthquakes and floods typically aren’t covered by commercial property insurance, unless those are added to the policy.
Crime Insurance
Crime Insurance protects businesses from theft and malicious damage, such as employee embezzlement.
How to Ensure You’re Covered for Theft
First off, there are the “common sense practices” one should adopt to prevent theft in the first place. Practicing good personal safety habits is the best way to protect yourself in any environment:
- Keep valuables out of sight and out of your car; including purses and wallets, cell phones, electronics, and jewelry, and never leave your valuables unattended.
- Do not carry more than you need. Leave unnecessary valuable items securely in your residence. Carry only the minimum amount of money or credit cards you will need for the day.
- File a police report. Most insurers demand that you file a police report in case of theft. It’s important to do this as fast as possible and keep a copy of the report for your insurance company.
All major insurance companies have comprehensive insurance coverage for theft. But it’s in the details to find the one that best fits your needs. Forbes gives several useful guidelines when selecting the best coverage and terms:
- Make a careful assessment of your requirements for a car, home, or business. It is critical to understand the type of policy you desire.
- Review coverage options. Not all coverages are the same and differences are typically found in the “fine print.”
- Compare plans. Insurance companies offer a wide range of solutions at several price points, allowing you to customize coverage to meet your unique requirements.
- Examine the claims procedure. The last thing you want to do is go through a complicated procedure to recover your losses. So, it is crucial that you pick a policy that has a simple and speedy claim process.
- Review the terms and conditions. Understand all of the terms and conditions in order to get value for the money you spend on your insurance and to avoid any legal issues when filing a claim.
Lastly, bundling policies, like adding comprehensive coverage to liability insurance, often give better premiums and terms with most insurers and better protection.
In Conclusion
Liability insurance does not cover theft, but other policies do. Comprehensive coverage for your car does cover car theft and damage. Homeowners insurance (and any property insurance) covers theft, which includes items stolen from your car.
Insurance documents are legal documents. An insurance policy is essentially a contract between the insured and the insurer that covers all the things both the insurance company and the person purchasing the insurance are bound by. This includes premiums, length of time of coverage, types of coverage, claims procedures, etc. These documents are often not the easiest to read, so it’s best to consult with an insurance agent to get advice on which insurance will best cover your needs.
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