Do you need identity theft insurance?
In 2021, the Federal Trade Commission (FTC) received more than 1.4 million identity theft reports. That’s a pretty scary statistic. This crime can upend your entire life, cause massive stress, and leave you with plenty of bills, paperwork, and bureaucratic obstacles to tackle. Before you jump online to purchase protection against identity theft through insurance, you should know a few things, including how much it costs and what it covers.
About Identity Theft
The U.S. Department of Justice defines identity theft as a “crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception," usually for economic gain.
Examples of identity theft and fraud include:
- Social security number identity theft
- Tax identity theft
- Mail identity theft
- Driver’s license identity theft
- Senior identity theft and scams
- Account takeover fraud
- Online shopping fraud
- Biometric ID theft
- Credit or debit card fraud
- Medical identity theft
What Is Identity Theft Insurance?
Identity theft insurance covers certain costs related to the crime. The purpose is to reimburse policyholders for the money they spent recovering their financial identity and repairing their credit score.
While coverage varies by company, most identity theft insurance covers the following costs:
- Lost wages
- Public record searches
- Copies of your credit reports
- Credit monitoring services
- Notary fees
- Legal fees
- Certified mailing fees
Important note: Identity theft insurance doesn’t cover direct financial losses (e.g., money stolen from your bank account).
How Much Does Identity Theft Insurance Cost?
Most insurance companies offer optional identity theft coverage. Several banks and credit card companies offer identity theft services, as well. The Insurance Information Institute (III) reports that adding identity theft insurance to an existing homeowners or renters insurance policy typically costs around $50 per year. The cost will depend on the policy and the company you choose.
Steps You Can Take to Protect Yourself
You can take several steps to protect yourself against identity theft and fraud. Here are a few ways to get started:
Keep an eye on your credit score. You can monitor your credit score using one or more online resources, including Experian and Credit Karma’s free credit monitoring services.
Double check your credit report for errors. You can get one free credit report request per year from each of the three major credit reporting bureaus (e.g., Equifax, Experian, and TransUnion). Visit AnnualCreditReport.com to find out more.
Make a habit of reviewing your financial statements. Online banking has made examining your bank and credit card statements easier. It only takes a few minutes to ensure your account is safe.
Create unique passwords for each of your online accounts. Changing your online passwords (e.g. online banking, email accounts, social media accounts) is another way to prevent yourself from becoming an identity theft victim. If cannot think of a safe password, consider using a password management system or random password generator.
Be aware of your surroundings. Whenever you’re at an ATM or entering your PIN at the checkout counter, take stock of who’s around you. The last thing you need is a “shoulder surfer” stealing your information!
Do your research. If you’re interested in learning more about how you can protect your identity, do a bit of research. Here are a few resources to get you started: Federal Trade Commission, PrivacyRights.org, Identity Theft Resource Center (ITRC), and IDSafety.org.
Is Identity Theft Insurance Worth It?
Identity theft insurance can offer you additional peace of mind, but having it doesn’t prevent you from becoming a victim. Before you make a final decision, read the fine print. See if there’s a deductible and determine if the policy covers lost wages, legal fees, etc.
After doing a bit of digging, you may find it’s easier and more cost-effect to utilize a free credit-monitoring tool.