There’s somewhat of a debate concerning identity theft insurance. Some analysts say identity theft insurance gives a false sense of security, while others consider it an added layer of security in recovering from identity theft. While both sides of the identity theft debate are valid points, the decision to purchase identity theft insurance comes down to a personal one. Understanding the basics of identity theft insurance can help you decide whether it is right for you.
Identity theft insurance provides reimbursement for expenses associated with recovering from identity theft and repairing your credit record. It does not protect you from becoming a victim of identity theft, or repair your credit standing.
When you consider a report from the Better Business Bureau and Javelin Strategy & Research that found that one in every 23 U.S. consumers is a victim of identity fraud, identity theft insurance offers value for the money. Its importance becomes even more significant when you factor in a report from the Identity Theft Resource Center that concluded identity theft victims spend an estimated 600 hours and thousands of dollars recovering from the crime. When deciding the necessity of identity theft insurance, think about whether you have the funds to pay over $1,000 to recover from the crime. Also consider how committed you are in taking measures to prevent identity theft. If you don’t have the time to regularly monitor your credit reports with all three credit bureaus, shred mail with your personal information on it, opt-out of credit card and magazine offers, or properly store your social security number and other identifying information, then identity theft insurance might be beneficial for you.
An identity theft insurance policy typically covers expenses to restore your identity and credit. Among the covered expenses are long distance phone calls, photocopies, notary fees and certified mailing costs. Some policies also pay for legal fees, stolen money up to a certain amount, and lost wages if you have to take time out of work for court dates or other appointments related to the identity theft crime. Identity theft insurance also provides direct loss protection for safe deposit boxes, as well as ATM cards, debit cards, credit cards and other methods of transactions.
Identity theft insurance is sold either as a stand-alone insurance policy or as a rider or endorsement to your homeowners policy. Coverage cost varies, depending on the deductible you select. The higher the deductible (the amount you pay before the insurance company pays its share), the lower the cost. Insurance premiums typically range between $20 to $100 a year for identity theft protection.
Before deciding on an identity theft insurance policy, check your existing insurance policies. Some insurance companies include identity theft coverage as part of their automobile, homeowner’s, or renter’s policies. You also may have some form of identity theft protection through your bank or credit card company. Most cover direct losses from identity theft related to fraudulent use of their credit cards. In addition, certain credit card companies provide free identity theft assistance to its card members.
Identity theft insurance should not be confused with an identify theft guarantee that some credit monitoring services provide. An identity theft guarantee, also called a service warranty, provides up to a certain amount of reimbursement for identity theft expenses if their service fails to prevent identity theft. If you use a credit monitoring service, check to see if it offers identity theft insurance or a service guarantee. Keep in mind that identity theft insurance, like all insurance, follows strict government regulations, while guarantees are unregulated.