You probably already insure your vehicle, home, and health. Should you add identity theft insurance to the list? Keep reading to learn about identity theft insurance, what it covers, and whether it makes sense for you to get it.
What is identity theft insurance?
Identity theft insurance is a type of insurance that helps cover some of the costs related to identity theft. Restoring your identity can be an expensive and time-consuming process, and complex identity theft cases can sometimes require legal assistance. Identity theft insurance doesn’t prevent identity theft from happening, but it can cover financial losses, such as debts incurred fraudulently in your name.
How does identity theft insurance work?
Identity theft insurance works in a similar way as your home or car insurance covers you in the event of an incident. You can usually purchase identity theft coverage from insurance providers as a standalone policy or as an add-on to an existing policy.
It’s important to note that identity theft insurance may not cover all types of money lost. Depending on the terms of your insurance plan, it’s possible that you’ll need to pay upfront some costs incurred during the identity recovery process. But, provided your expenses qualify, your insurance provider should reimburse you for them (for up to as much as your policy stipulates). These costs can range from phone bills to legal help.
What does identity theft insurance cover?
Typically, identity theft insurance covers some of the expenses incurred from the day-to-day activities and efforts made trying to restore your identity and repair your credit. Identity theft insurance may not cover all direct financial losses as a result of identity theft, but it will ordinarily reimburse some of the expenses that happen after the theft occurs.
Here’s a list of expenses that might be covered, depending on the policy:
- Bank fees charged in connection with fraudulent activity on your account.
- Notary fees for obtaining certified copies of your identity documents.
- Lost wages if you need to take time off work for activities to restore your identity (for example, meeting with your attorney).
- Legal fees, such as hiring an attorney to represent you at court hearings or for legal advice.
- Money stolen as a result of identity theft may be reimbursed up to a certain amount, depending on your plan and provider.
- Credit agency fees for placing fraud alerts on your credit reports and obtaining copies of your credit reports.
- New document costs for replacing important identifying documents, like a stolen or lost Social Security card or driver’s license used for identity theft.
- Specialist fees for identity restoration consultants who can work with your creditors, credit bureaus, credit card companies, and other financial institutions to streamline and help guide you through the identity recovery process.
- Long-distance phone bills incurred after identity theft.
- Postage costs for registered mail and expedited shipping of documents.
- Child care costs if you need to pay for child care while you undertake activities to restore your identity.
- Other financial fees such as loan reapplication fees if you’re denied credit due to fraud from identity theft.
How much does identity theft insurance cost?
How much is identity theft insurance? The cost depends on a few factors, including where you live and how comprehensive the coverage is. You may be able to add it to an existing insurance policy, such as homeowners or renters insurance, or you can purchase it as a standalone policy.
It’s not just the policy cost to take into consideration — you should also ask the following questions:
- What are the policy limits?
- Is there a deductible?
- If lost wages are covered, what triggers this coverage?
- If a policy covers legal fees, does legal work need to be pre-approved by the insurer?
Is identity theft insurance worth it? 3 questions to ask yourself
Reclaiming your identity can be slow and costly. That’s where having an identity theft protection service to supplement identity theft insurance can help. But whether it’s worth it will depend on individual tolerance for risk and how much work you’re willing to do if you become a victim of identity theft. Here are three questions to ask yourself when considering identity theft insurance:
1. Do I have existing protection?
You may already have some form of identity theft protection insurance through your credit card company, employer, or your homeowners or renters insurance policy. In 2020, the Insurance Information Institute reported that “few U.S. homeowners and renters realize their existing insurance policies offer them limited identity (ID) theft coverage.”
So it pays to check if you already have some form of identity theft insurance or protection services. Just make sure the coverage is suitable for your situation.
2. Can I do it myself?
Resolving identity theft problems and recovering your financial identity can take time and cause undue stress, but it’s not always a disaster. It’s important to remember that, while there are some overlaps, identity theft insurance is not the same as identity theft resolution. Since identity theft insurance doesn’t usually kick in until after you become a victim, try and help yourself before it happens.
Here are some steps you can take to help protect your identity:
- Freeze your credit. This is a particularly good option if you’re not actively applying for credit.
- Monitor your credit reports regularly.
- Check your bank and credit card accounts regularly, looking for suspicious transactions or withdrawals.
- Learn how you can protect yourself against identity theft and follow our tips on ways to avoid identity theft.
- Use a dedicated identity theft protection service such as LifeLock Standard. LifeLock will alert you to suspicious and potentially fraudulent use of your personal information, and it will help protect you against identity fraud and help restore your identity if you ever fall victim.
3. How much am I at risk?
Another consideration when deciding whether to sign up for identity theft insurance is how at-risk you think you are. Your behavior and how you protect your personal information online can increase or mitigate your risk of becoming an identity theft victim.
Ask yourself these questions:
- Do I use strong passwords?
- Do I use two-factor authentication to log into my accounts?
- Do I safeguard my personally identifiable information?
- Do I know where all my important documents are?
If you answered yes to these questions, then you’re already taking steps to mitigate your risk of identity theft.
Although there are laws that cap losses for fraudulent transactions on bank accounts and credit cards, you are still at risk of damage to your credit score and credit reports caused by identity thieves taking out loans, credit cards, utility accounts, and all manner of debts in your name.
According to the FTC (Federal Trade Commission), more than 1.1 million Americans reported identity theft in 2022. Credit card fraud is the most reported type of identity theft, and you may decide that identity theft protection is worth it to know you have a way to recoup the costs of repairing your financial identity.
Where can you get identity theft insurance and protection?
If you’re looking to get identity theft insurance or want to sign up for an identity theft protection service, check the details of each offer so you know what is included. Most identity fraud insurance policies are designed to help reimburse you well after you’re already a victim, whereas an identity theft protection service tends to be more focused on helping you find out when you become a victim of identity theft and helping you fix the issues that come with it.
If you’re after a combination of protective measures to supplement your identity theft insurance policy, then a LifeLock Standard membership is a good place to start. In addition to extensive personal data and credit monitoring, our dedicated restoration specialists will help you fix issues if your identity is stolen.
Most insurance providers offer identity theft insurance. If you already have other insurance policies, such as homeowners, renters, or car insurance, you may be able to get identity theft insurance as an add-on to your existing policy. This is a convenient option if you like to have all your insurance together with one provider.
Some insurance companies also sell insurance for identity theft as a stand-alone product. With these options, you can shop around and take out an identity theft insurance policy even if you have no other insurance policy with that company.
Credit card companies
Some credit card providers offer identity theft insurance or protection services, either included with your credit card or as an add-on service. Check with your credit card provider to find out what they offer and what may already be included with your current credit card.
Identity theft protection services
Identity theft protection services are different from identity theft insurance. Many protection services offer experts to help fix issues in case your identity is stolen, and they also monitor for use of your personal information so you can respond to identity theft when it happens.
Identity theft protection services usually include features such as:
- Dark web monitoring (§) that scours the dark web for traces of your personal information being sold or traded by criminals.
- Stolen wallet protection that provides assistance with canceling cards and organizing replacements.
- Credit monitoring that keeps an eye on your credit score with credit agencies to detect fraud.
- Alerts that notify you when your personal data is used in applications for loans and credit cards.
Make sure you know what is and isn’t included in the offer to help you decide which plan is right for you.
Choose the best option for your situation
Identity theft is a serious problem that requires a range of tactics to stay ahead of identity thieves. If you do become a victim, then having identity theft insurance offers strong benefits. As a supplement to identity theft insurance, consider using an identity theft protection service.
To get the benefits of identity theft protection and help from identity restoration specialists if you do become a victim of identity theft, consider a LifeLock Standard membership. With privacy monitoring services, stolen wallet protection, credit monitoring, and more, LifeLock Standard helps give you peace of mind in our increasingly complex digital world.
FAQs about identity theft insurance
How does identity theft happen?
Identity theft starts with a thief obtaining your personal information, such as your full name, date of birth, address, Social Security number, driver’s license number, or credit card details. This can happen in a number of ways:
- Dumpster diving or stealing mail from your mailbox
- Installing malware on your computer
- Hacking into your accounts or Wi-Fi
- Data breaches
- Wallet or mobile phone theft
After obtaining your personal information, the thief may sell your data to other criminals or use it to impersonate and defraud you.
Do I need identity theft insurance?
Get identity theft insurance if you want the security of knowing that you’ll get help when trying to get reimbursed for the costs associated with recovering your identity.
Identity theft can have devastating consequences, so if you’re a victim, you could find yourself paying many fees and expenses — not to mention the time involved — to recover your identity. f you’re a victim, you could find yourself paying many fees and expenses — not to mention the time involved — to recover your identity.
What doesn’t identity theft insurance cover?
Identity theft insurance coverage generally has a wide range. Typical plans include some sort of coverage for stolen money, fraudulent charges on your credit cards, or other financial losses incurred from fraudulent use of your identity. But identity theft insurance likely won’t help to prevent identity theft from occurring, and it typically won’t help monitor your credit reports or the use or sale of your personal information online.
§ Dark Web Monitoring in LifeLock is not available in all countries. Monitored information varies based on country of residence or choice of plan. It defaults to monitor your email address and begins immediately. Sign into your account to enter more information for monitoring.