Understanding Identity Theft Insurance: Coverage, Costs, and Alternatives

What is Identity Theft Insurance?

Identity theft insurance is an optional coverage that can be added to home insurance policies to help mitigate the financial and personal consequences of identity theft. It typically covers expenses related to restoring a stolen identity, such as legal fees, lost wages, and credit monitoring services.

Coverage Details

Identity theft insurance usually doesn’t cover direct monetary losses resulting from identity theft, as these are typically reimbursed by banks or credit card companies. Instead, it focuses on the costs associated with recovering from identity theft, including:

• Assistance from a fraud specialist
• Credit monitoring services
• Reimbursement for lost wages due to time taken off work to restore your identity
• Costs associated with civil judgments, criminal charges, or audits related to the identity theft
• Professional help in reclaiming your identity and restoring your credit
• Expenses for replacing identification documents
• Attorney and court fees related to civil judgments

Is Identity Theft Insurance Worth It?

Whether or not identity theft insurance is worth it depends on your current coverage and personal circumstances. If your home insurance policy already includes some level of identity theft protection, additional coverage might not be necessary. However, for those without existing coverage, it could provide valuable protection against the increasingly sophisticated methods used by identity thieves.

Costs of Identity Theft Insurance

The cost of identity theft insurance varies among insurers, ranging from $25 to over $500 per year, depending on the extent of coverage. Major home insurance companies like Allstate, Amica, State Farm, and The Hartford offer identity theft insurance as an add-on to their policies.

Alternatives to Identity Theft Insurance

For those who prefer not to purchase identity theft insurance, there are alternative methods to protect against identity theft:

1. Self-monitoring: Regularly check financial statements for unauthorized transactions and enable two-factor authentication for online accounts.
2. Free resources: Utilize free services like fraud alerts from the three major credit bureaus (Equifax, Experian, and TransUnion), and request an identity protection PIN from the IRS.
3. Identity theft protection services: Companies like Aura, Norton LifeLock, Identity Guard, TransUnion Identity Protection, and IdentityForce offer comprehensive monitoring and protection services, often including identity theft insurance as part of their packages.

Key Considerations

When deciding on identity theft insurance or alternative protection methods, consider the following:

• The prevalence of identity theft and its potential impact on your financial and personal life
• The level of protection already provided by your existing insurance policies and financial institutions
• The costs and benefits of additional identity theft insurance or protection services
• Your personal risk factors and the likelihood of being targeted by identity thieves

By understanding your options and taking proactive steps, you can better protect yourself against the risks associated with identity theft.