Identity theft insurance

1

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Identity theft strikes when you least expect it, and oftentimes you can’t trace how a thief obtained your personal information. With just a little bit of your information, thieves can make fraudulent charges on your debit card, steal money from your bank account, or take out a loan.

Identity theft accounted for the highest percentage of all reports made to the Federal Trade Commission (FTC) in 2020, as shown in the fraud and identity theft report. Out of the 470,000 identity theft reports made, 39% were attributed to government documents and benefits fraud. Not keeping a tight lock on personal information could be more costly now than ever, as all fraud has reportedly cost more than $3.3 billion in losses — nearly $1.5 billion more than in 2019.

Unfortunately, fraud victims may often end up paying for losses out of their own pocket. But if you make a small investment in identity theft insurance, you could avoid losses and get the help you need when a fraudster strikes. Obtaining the protection you want may be easier than you expect. Oftentimes, it’s as easy as adding a rider to your homeowners insurance policy.

What is identity theft insurance and what does it cover?

The personal property coverage of a homeowners insurance policy offers little protection against most identity theft. Typically, home insurance policies cover belongings such as clothing and furniture. Most homeowners policies cover the theft of a limited amount of cash. If a burglar steals your wallet, for example, your home insurance might reimburse you for the money it held, typically limited to a few hundred dollars. But if the thief uses the personal information obtained within the wallet to get a car loan, your homeowners policy won’t come to the rescue.

Identity theft often goes far beyond the initial monetary losses. When a fraudster uses your credit card to buy an airline ticket, you can cancel the card and request a new one. Oftentimes, the credit card company will reimburse you following a short investigation. But other types of identity theft can cause serious (sometimes lasting) damage to your finances and credit rating. You may have to hire an attorney to help restore your credit or to fight civil judgements that could result from fraudulent accounts opened in your name.

Most major property insurance providers offer identity theft coverage as a rider to your homeowners policy and a few include it in standard home policies. Identity theft coverage varies widely, from reimbursement of stolen funds to a host of services to help repair the damage. Some identity theft policies include:

  • Assistance of a fraud specialist
  • Credit monitoring services
  • Reimbursement of lost wages caused by taking time off from work to restore your credit or reclaim your identity
  • Professional assistance in reclaiming your identity and restoring your credit
  • Reimbursement of costs involved in replacing identification documents, such as a driver’s license or Social Security card
  • Reimbursement of audit and account application fees
  • Reimbursement of attorney’s and court fees associated with civil judgments

Which insurance companies offer identity theft protection?

Most major home insurance companies offer optional identity theft coverage. Oftentimes, you can even add identity theft insurance when submitting information for an online quote. The best types of identity theft insurance include reimbursement for fraudulent charges or stolen funds, plus credit monitoring.

Allstate: When you purchase an Allstate home insurance policy, you can add its optional identity theft protection, which offers a comprehensive collection of benefits. Allstate’s Digital Footprint service collects data from all your accounts and alerts you if someone opens a new account in your name or when your data is breached. Allstate also monitors your credit, financial and social media accounts and alerts you if your information appears on the dark web. If a fraudster targets you, Allstate will cover up to $500,000 in reimbursements for money stolen from your bank account.

Amica Mutual: Amica’s identity fraud coverage pays up to $15,000 in expenses you incur resolving identity theft issues, including legal fees, lost wages and notary fees. Amica also provides policyholders professional identity theft assistance, along with credit monitoring.

State Farm: State Farm’s Identity Restoration Insurance reimburses up to $25,000 in necessary expenses related to identity theft restoration, including application fees, attorney’s fees, auditing costs, civil judgments, court costs and credit report fees. You can also add cyber attack and cyber extortion coverage, which pays up to $15,000 in expenses incurred to retrieve your data if a ransomware program hijacks your computer.

The Hartford: The Hartford’s optional Identity Fraud Expense Coverage reimburses you for up to $25,000 worth of expenses related to fraud and identity theft. You can beef up your protection by adding The Hartford’s Identity Restoration Services and ID Hotline coverages, which include the services of fraud specialists.

USAA: USAA includes a limited amount of identity theft coverage in all its standard homeowners policies. The coverage only pays up to $5,000 in most of its standard homeowners policies, but you can purchase additional protection. USAA identity theft protection isn’t available in all states and the provider only offers insurance products to military members and their families.

Identity theft insurance can help cover the cost of reclaiming your identity and restoring your credit following a fraud incident, but you can also take steps to prevent becoming a victim.

Cyber protection services can monitor your online activity and alert you of suspicious activity associated with your personal information. For example, the LifeLock service includes Norton antivirus protection along with identity monitoring service. LifeLock alerts you when it detects suspicious activity that may threaten your personal data and reimburses you for up to at least $25,000 in stolen funds, depending on the plan you choose.

Is identity theft insurance worth it?

The threats of today’s online world demand all types of protection. Because of the sensitivity of people’s private information, such as social security numbers, bank accounts and passwords, there are services available to protect you from identity theft in case leaks happen. Identity theft insurance is generally very affordable, especially when you add it as a rider to your homeowners coverage. For example, State Farm’s Identity Theft Insurance coverage costs just $25 per year. Geico identity protection starts at around $8 per month and LifeLock starts at around $10 per month.

Identity theft insurance may not be for everyone. There are steps you may take on your own to protect your identity, such as setting up randomized passwords and regularly checking your credit report. Additionally, because reimbursement for stolen money and other assets is generally not included in the insurance, you may choose to remain extra diligent about your identity without paying for protection.

However, if you are someone with a higher profile or have multiple financial accounts, it could be challenging to manage your information by yourself securely. In these cases, it could go a long way to have additional monitoring of your information to alert you to any potential compromises. Assistance in recovering your identity could also save you time, money and resources.

If a thief steals your identity, you may end up spending thousands of dollars reclaiming your identity and restoring your credit. But for less than $30 per month with many companies, you could feel more at ease knowing your sensitive information is being monitored and help is available in case something goes awry.

Alternatives to identity theft insurance

Although identity theft insurance may prove beneficial, it is not the only option you have to protect yourself and your information. There are several ways to help avoid and spot identity theft yourself.

  • Regularly check your financial statements for unauthorized transactions.
  • Enable two-factor authentication so you are alerted to account logins and can verify any attempts.
  • If you suspect that your identity has been compromised, you could do a credit freeze to help prevent new accounts from being opened in your name. Credit freezes can generally be done free of charge.
  • Avoid providing your social security and other private information to unknown sources, such as phishing emails, scam websites posing as official ones and unverifiable over-the-phone requests.

Some other free resources for identity protection include:

  • Initial fraud alerts let credit lenders know to contact you to request more identification before issuing credit. You may set up fraud alerts through any one of the three national credit bureaus — Experian, Equifax and Transunion. Once you enable it for one credit bureau, it is generally automatically applied to the other two. However, to lift the alert, you may have to contact each bureau.
  • TransUnion TrueIdentity offers protection for identity theft up to $25,000 free of charge. Users can also receive alerts for significant credit information changes reported to TransUnion, as well as unlimited access to updated TransUnion credit reports. Although the service is free, users who want more protection and information have to pay for the upgraded product, including monitoring your identity on the dark web, among other things.
  • IRS IP PINs offer tax filing protections for confirmed identity theft victims. To verify that you are submitting the incoming tax return, you receive a unique six-digit identity protection PIN to verify the return so that no one else can file using your social security number. While this can be beneficial, it does require you to remember an additional piece of information. If your PIN is not entered correctly, your return could be delayed or rejected.

Frequently asked questions

How much is identity theft insurance a month?

When you purchase homeowners insurance, some providers offer optional identity theft coverage for $10 per month or less.

Does my homeowners policy cover identity theft?

Most standard homeowners policies include little or no identity theft coverage. If someone steals your wallet, your homeowners policy may reimburse you for a limited amount of cash, but that’s about all. Most major home insurance companies offer identity theft insurance as a rider to your homeowners policy.

Will identity theft insurance reimburse me if someone fraudulently uses my credit card?

It depends. Many identity theft policies reimburse you for stolen funds, but some only help pay costs related to restoring your credit and reclaiming your identity.

Do identity theft policies include credit monitoring?

Some do and some don’t. The most comprehensive identity theft insurance covers expenses you may incur reclaiming your identity and restoring your credit, along with account and credit monitoring to help prevent identity theft from occurring.