Identity theft remains a significant threat, with over 1.1 million reports filed through the Federal Trade Commission’s IdentityTheft.gov website in 2024 alone. The process of restoring your identity after theft can be time-consuming and costly, with victims spending an average of $1,200. Identity theft insurance can help you recover from the financial burden.
What is Identity Theft Insurance?
Identity theft insurance reimburses out-of-pocket expenses associated with restoring your identity. This includes costs such as replacing lost IDs or paying legal fees needed to restore your credit. It’s important to know that most policies do not cover stolen money or financial losses resulting from the unauthorized use of credit cards or other fraudulent activities.
How to Get Identity Theft Insurance
There are several ways to obtain identity theft protection:
- Homeowners Insurance: Many insurance companies include identity theft coverage as part of their homeowners insurance policies or as add-on riders.
- Standalone Policies: You can purchase identity theft insurance as a separate policy.
- Identity Theft Protection Services: These services often include some form of insurance along with other features like credit monitoring.
- Credit Card Companies: Some credit card companies offer identity theft insurance or protection programs for their cardholders.
Here’s a look at how some companies offer identity theft insurance:
- Nationwide: Standard homeowners policies include up to $25,000 in coverage for expenses related to restoring your identity, with an option to increase to $100,000.
- State Farm: Offers an add-on to their homeowners policies that covers fraud losses, identity restoration, and cyberattacks.
- Amica: Standalone identity theft insurance pays up to $15,000 for legal fees and lost wages. They also offer comprehensive homeowners insurance policies with broader identity theft protection.
- USAA: Personal cyber insurance covers identity theft, offering up to $50,000 in coverage.
- Experian IdentityWorks℠: A premium service that includes $1 million in coverage for out-of-pocket expenses and access to fraud resolution specialists.
- Aura: Offers plans that include $1 million in identity theft insurance to cover eligible losses and legal fees.
- American Express: The CreditSecure™ program reimburses cardholders up to $1 million for expenses related to identity restoration.
- Discover®: For an additional fee, Discover® cardholders can receive up to $1 million in coverage to cover stolen funds, legal expenses, and other costs.
What Does Identity Theft Insurance Cover?
Identity theft insurance generally covers expenses related to identity recovery. Common covered expenses include:
- Costs to replace driver’s licenses, Social Security cards, and other identification documents
- Lost wages due to time taken to resolve the issue
- Legal and notary fees incurred during the recovery process
- Bank fees resulting from fraudulent activities
- Costs for identity restoration specialists
It doesn’t typically cover direct financial losses like stolen cash or fraudulent purchases made with credit cards. Keep in mind that the Fair Credit Billing Act limits your liability for unauthorized credit card use to $50. Most card issuers also have zero liability policies for fraudulent charges.
How Much Does Identity Theft Insurance Cost?
The cost of identity theft insurance varies depending on the type of insurance you choose:
- Standalone Policies: A standalone policy may cost between $25 to $60 per year.
- Identity Protection Services: Full-service identity protection plans, which often include credit monitoring, can be significantly more expensive.
Is Identity Theft Insurance Worth It?
With over a million cases reported in 2024, identity theft is a serious concern. While identity theft insurance cannot reimburse you for direct monetary losses, it can substantially help cover costs associated with restoring your identity.
To further protect yourself, consider pairing identity theft insurance with identity theft protection services that monitor your personal information or credit monitoring programs to alert you to changes in your credit reports.
