Identity Theft Insurance 101: What It Is? What Does It Cover?

Identity Theft Insurance 101: What It Is? What Does It Cover?

Privacy is a myth. You must have felt this way sometime, and indeed it is true. Here are a few stats to help the idea reach you. According to Federal Trade Commission (FTC) Consumer Sentinel Network Data Book, a total of 650,572 identity theft reports were filed. And a total of $1.9 billion were lost as a result of these frauds in the year. The continuous growth in these frauds can be felt by the fact that $293 million more were lost than the previous year. However, there is no clear solution to this problem but vigilance and identity theft insurance.

Thus let us get to know about identity theft insurance.



What Is Identity Theft Insurance?

The first step is obviously to know what is meant by identity theft.

Identity theft is when someone steals your personal information like your Social Security Number, credit card numbers, or bank account numbers. With such critical information with them, they try to impersonate you and commit fraud. Most of these frauds are financial. Like:

  1. Buying stuff from your credit card
  2. Or opening a gas or electricity account in your name
  3. Or mug you of your tax refund
  4. Or they might also use your health insurance to receive health care
  5. Or get one or more new cards sanctioned in your name,
  6. Or they can even pretend to be you when they are arrested

These frauds are a big issue and the one that is only increasing day by day. And it is not easy to deal with it once a specific time limit has passed. You face repercussions, and setting things straight is not a cakewalk. The recovery process, which includes getting credit scores corrected, can take a week or several years. Until then, you are left with a bad credit score which makes getting loans difficult, and even unemployed.

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As previously mentioned, there are only two ways to deal with this issue- vigilance and identity theft insurance. Insurance helps you recover from the fraud and is an extension to your homeowners’, renters’, and even auto insurance. It is also available as a standalone policy from many insurance agencies. And the cherry on the cake is that it is very economical.



What Does Identity Theft Insurance Covers?

It is an extensive cover that protects you from theft and also helps recover when theft occurs. Let’s see what coverages the policy provides.


#1: Loss Of Income

It is not easy dealing with such fraud. If you need to take off from work to work on the theft recovery, the insurance company will pay you for your lost wages.


#2: Mailing Costs

Such frauds involve legal matters and sending and receiving of many documents. Since you want to ensure that your papers land at the correct address, you must use certified mail and request a return receipt. And if you had insurance, your policy will pay all the mailing costs.


#3: Notary Fees

Again, since you would need to get your documents notarized, the policy you buy might cover these expenses.


#4: Phone Bills

If you need to make phone calls to get the recovery work done, the policy can cover your phone bills.


#5: Child Care

This is not a very common coverage. But in case you go out to sort the whole theft issue and need somebody to take care of your child, then some policies even cover child care.


#6: Legal Fees

If a lawsuit is filed for recovery, then the policy might also cover attorney and court costs. As we all know, court fees pile up fast, and insurance can be a good friend in such times.


#7: Credit Monitoring

This is the best service your policy can provide you. It monitors whether your information is available for sale and also detects if a fraud has occurred. Most policies typically include this coverage.

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So, this was all that an identity theft insurance policy covers. But did you notice that the actual coverage for the money lost, the money that the fraudster made you lose, is missing! Well, because this policy does not cover the direct losses that the insurer undergoes but covers those that the insurer incurs after the fraud has occurred.

However, your bank is liable to pay you all your losses, only if you report the fraud early.



How To Buy Identity Theft Insurance?

So, if now you are considering buying the policy, then hold on; there are a few aspects you must know about to make an intelligent decision.

Firstly, you can buy the policy in three ways:

  1. The first step is to check whether your homeowners’ or renter’s policy already has it.
  2. Next, you can add it to your existing homeowners’ or renter’s policy.
  3. Lastly, you can also buy a standalone policy from the carriers who specialize in identity theft policies.

Furthermore, according to Insurance Information Institute, this policy costs anywhere between $25 t $50 per year. This, if you ask us, is not a very big amount to pay for peace of mind. Also, the policy cost would lie in the range mentioned above, no matter whether you buy a rider or a standalone policy.

An essential point to consider whenever you buy a policy is always the deductible. This policy, too, sometimes has a deductible ranging between $100 to $500.

Finally, it is always a smart move to compare policies before you sign up for one. And here are the points that you should gauge various policies on:

  1. Check what the policy limits for all the coverages are.
  2. Check if there is a deductible
  3. In case the policy covers lost wages. You must know the coverage limits and what will trigger this coverage.
  4. Lastly, if the policy covers legal fees, check out the limits and whether the insurer needs to pre-approve the legal help.



Last Words…

Though it is always best to guard your personal information, it is good to know that someone has got your back if there is a fraud. The fraudster can use your information repeatedly or cause you low credit scores, etc., and you will be required to pay for all the expenses to put things straight. If you have an identity theft insurance policy, you can shrug away at least some of the stress. So, think well and shop around before you buy any policy.

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We hope you found the information helpful. And if you have any doubts, questions, or suggestions, please drop a comment. We are all ears and reply ASAP.