What Is Identity Theft Insurance?

What Is Identity Theft Insurance?

Identity theft insurance gives victims financial and practical assistance in recovering from identity theft. Recovering from identity theft can be a time-consuming and costly process, involving hours on the phone, time off from work, filing police reports and more. In 2023, the average consumer hit by identity fraud spent 10 hours resolving the issue, up from six hours in 2022, according to Javelin Strategy & Research.

Untangling a case of identity theft may involve legal expenses, lost wages, travel costs and fees for obtaining or filing documents. Identity theft insurance typically reimburses victims for the time and expense involved in reclaiming a stolen identity. It may also pay back money that was stolen by identity scammers.

Learn more: What Is Identity Theft?

What Does Identity Theft Insurance Cover?

Although coverage can vary widely depending on your insurer and state, identity theft insurance may include the following coverage.

Reimbursement for Expenses and Losses

Financial restitution is a key component of identity theft insurance. This may include reimbursing you for:

• Stolen funds: This could include money stolen from bank accounts, investment accounts and health savings accounts using unauthorized electronic funds transfer.
• Legal fees:Coverage may pay your attorney fees for defending you in an identity theft-related lawsuit.
• Lost wages: Recover wages you lost by taking time off from work to address identity theft, or receive compensation for using your personal days, sick days or paid holidays to deal with identity theft.
• Cost of child care, spousal care or elder care: Identity theft insurance may cover the cost of care for child, spouse or elderly relative while you spend time resolving your identity theft case.
• Notary fees: If you need to get theft-related documents notarized, such as paperwork for a court case, identity theft insurance might cover the cost.
• Fees from financial institutions: Your policy may reimburse you for nonsufficient funds charges, late payment fees and other fees arising from identity theft.
• Certified mail expenses: Coverage may include expenses for sending theft-related documents by certified mail.
• Phone bills: Any phone calls you make related to your identity theft case might be paid by identity theft insurance.
• Cost of resubmitting applications: If your application for an apartment, for example, was denied due to identity fraud, coverage may pay any fees involved in submitting it again.

Help Resolving Identity Theft

You'll typically also get help resolving issues arising from identity fraud, including:

• Remediation assistance from a consumer fraud specialist: As part of your insurance plan, an expert might be assigned to guide you through the process of recovering from identity theft.
• Services of private investigators: Your insurance company may provide an investigator to help resolve your case.

Identity Theft Protection Services

Finally, many identity theft insurance plans also include identity theft protection tools such as:

• Credit and identity monitoring: Identity theft insurance generally includes services that monitor your identity and credit for suspicious activities, such as new accounts opened in your name. It may also monitor the dark web for signs that your passport, driver's license, Social Security number or other personal information is being sold online.
• Financial account monitoring: Some identity theft insurance plans keep tabs on your bank accounts, credit card accounts, retirement accounts and health savings accounts and alert you to potential signs of identity theft.
• Title monitoring: An identity theft insurance policy may alert you to suspicious changes in your home or car title.
• Device protection and cybersecurity tools: Your plan may provide safeguards such as VPN, data encryption, malware and ransomware protection, password managers or scam phone call protection.

Learn more: How to Check for Identity Theft

What Does Identity Theft Insurance Not Cover?

Identity theft insurance can't protect you from becoming a victim of identity theft. There are also some losses it won't cover:

• Losses due to preauthorized transfers.
• Losses because you gave someone access to your account.
• Losses above the policy's limitations: Policies may have different caps for different kinds of loss. For instance, lost wage coverage may be limited to $1,500 per week for five weeks, while coverage for stolen funds may be $1 million.
• Deductibles: Some identity theft policies require you to pay a deductible when you file a claim.
• Losses that occurred before you bought the insurance: Your plan must be active, with premiums paid up, for identity theft to be covered.
• Losses not reported in a timely fashion: You typically need to report the loss within a certain time frame of discovering it, such as 60 days.
• Stolen funds you haven't tried to recover from your financial institution: Before filing a claim to be reimbursed for lost funds, you must attempt to get the money back from your financial institution.
• Losses due to errors in inputting or processing computer data.

How Much Is Identity Theft Insurance?

The cost of identity theft insurance can range from less than $10 to $60 or more per month. Prices vary depending on how many people are covered, the level of coverage you purchase, where you buy your policy and whether you pay monthly or upfront. Many policies offer lower rates for the first year but renew at a much higher rate.

For instance, adding identity theft insurance to your State Farm home, condo or renters insurance policy costs only $25 annually, but coverage is limited to $50,000 per year per person. LifeLock plans range from $7.50 per month to $69.99 per month, but the $69.99 includes up to $3 million in aggregate coverage for legal expenses, stolen funds and personal expense reimbursement.

You might also qualify for free plans from your employer or an organization you belong to. AAA, for example, offers identity theft insurance with $10,000 in coverage free to its premier members.

Is Identity Theft Insurance Worth It?

Even if you're diligent about protecting your identity, securing your devices and monitoring your accounts, there are things you can't do on your own, such as monitoring your information on the dark web. As scammers become more sophisticated, letting your guard down long enough to click on an email or text message link is all it takes to expose your personal data to thieves. Purchasing identity theft insurance can give you peace of mind by providing financial resources and expert support to help clean up the mess identity theft can leave behind.

Before you shop for identity theft insurance, check to see what type of coverage you already have. For example, if your data has ever been breached, you may have a free account through a standalone identity theft protection service. You may also have access to free, discounted, or add-on identity theft protection through the following sources:

• Your employee benefits plan
• A membership organization such as AAA or AARP
• A credit card company
• Your bank or credit union
• Your homeowners, renters or auto insurance policy

Check to see what type and amount of identity theft insurance any such plans offer and decide if you need additional coverage.

Learn more: How to Report Identity Theft

How to Get Identity Theft Insurance

You can buy identity theft insurance from property insurance companies, credit card companies, standalone identity theft insurance providers, banks and credit unions.

• Insurance carriers: Companies that sell homeowners, renters or auto insurance may sell identity theft coverage as an add-on to existing property insurance, as State Farm and Nationwide do, or offer it for free, as Travelers does for certain policies. Allstate, Geico and MetLife are among the property insurance carriers that sell standalone policies.
• Credit card companies: Some credit card issuers offer identity theft insurance. Although it isn't identity theft insurance, most credit card companies provide zero liability fraud protection for fraudulent charges, including those that result from identity theft.
• Banks and credit unions: You may also have access to identity theft insurance through your bank or credit union. For instance, when you sign up for Chase Credit Journey, a free service from Chase, you can enroll in identity theft monitoring that includes up to $1 million in coverage.
• Identity theft coverage providers: Companies such as IdentityForce, IDShield and LifeLock sell standalone identity theft coverage.
• Credit monitoring services: Companies that offer credit monitoring services, such as Experian, may also provide identity theft protection and insurance. The Experian premium identity theft protection plan offers up to $1 million in identity theft coverage.

How to Protect Yourself From Identity Theft

With or without identity theft insurance, there's a lot you can do yourself to protect against identity theft.

• Protect your personal information. Avoid sharing your Social Security number, birth date, bank account numbers and other sensitive information. Shred documents containing personal data before throwing them away.
• Create strong passwords and change them regularly. Using a password manager is an easy way to create, save and track your passwords.
• Keep tabs on your financial accounts. Review your bank, credit card, investment and retirement account statements for anything suspicious, such as transactions you don't recognize.
• Safeguard your computers and devices. Install security software and keep it up-to-date. When using public Wi-Fi, check to make sure it's secure. Consider using a virtual private network (VPN) for added security.
• Be wary of unexpected communications. Scam artists can make phone calls and emails appear to be coming from a trusted source, like your bank or credit card company. Avoid clicking on links or giving out personal information.
• Review your credit report regularly. You can check your credit reports from all three consumer credit bureaus (Experian, TransUnion and Equifax) for free once a week at AnnualCreditReport.com. Unfamiliar credit inquiries or accounts could signal identity theft.

The Bottom Line

Practicing good habits such as checking your credit report, regularly reviewing financial account statements and protecting your private information can help reduce your risk of identity theft. Experian's free basic protection plan monitors your credit and alerts you of activity that could signal fraud.

Should you fall victim to identity theft despite your best efforts, having identity theft insurance in place can ease your recovery. Premium paid Experian protection plans include advanced identity theft monitoring, dedicated fraud resolution support and up to $1 million in identity theft coverage.