In 2023, the Federal Trade Commission logged over one million reports of identity theft. Perhaps the number of identity fraud reports is even more startling: 2.6 million, resulting in over $10 billion in losses.
Identity theft and fraud is big business for scammers and thieves. But just like home insurance protects you from financial losses, so can identity theft coverage.
Let’s take a closer look at what identity theft is so we can better understand how this coverage works.
What is identity theft?
Identity theft is the act of someone taking your personal information without permission.
What counts as personal information? The list typically includes things like your:
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Address.
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Phone number.
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Social Security number.
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Credit card details.
Criminals may take this information to secure credit in your name, create alternative identities for themselves, or access your existing financial accounts. When they do that, then they’ve committed identity fraud. Essentially, identity theft is stealing the information while fraud is the misuse of that information.
What is identity theft coverage?
Identity theft coverage is a type of insurance that helps you recover the cost of restoring your identity and credit if you’re a victim of identity theft. That means your insurance company helps pay expenses that are the result of your identity being stolen.
Insurance policies generally don’t cover cash, and that’s true of identity theft and fraud coverage. Any money a thief steals from you by taking and using your personal information is not covered by identity theft insurance.
How does identity theft coverage work?
Some insurers include identity theft protection in their basic homeowners policies, but the amount may be somewhat limited. Others offer identity theft or identity fraud coverage as an endorsement (or add-on) to their home insurance for an additional premium.
What does identity theft coverage include?
Simply put, working through identity theft can be a frustrating and expensive nightmare. When one issue is fixed, another often takes its place. Depending on the specifics of your coverage, identity theft protection helps with the following costs.
Legal fees and court costs
Legal fees, court costs, and lawyer bills can add up. When they’re associated with resolving identity theft issues, then identity theft coverage reimburses these expenses.
Lost wages due to resolving identity theft
Identity theft policies and endorsements typically reimburse you for lost income stemming from attempts to restore your identity. So if you end up taking time off of work to go to court or meet with credit counselors and you don’t get paid, your insurance company mostly likely covers your wages.
The cost of identity recovery assistance
Identity theft recovery costs usually include replacing paperwork and filing claims. Identity theft insurance coverage can offset the costs associated with these filings and replacement documents.
Monitoring and alert services
Your insurer may offer the option of adding identity theft and credit monitoring to your identity theft coverage. This monitoring often includes alerts if something unusual is uncovered in your financial and credit activities.
How much does identity theft coverage cost?
Identity theft coverage can be affordable depending on your circumstances, plan, and provider. Average costs for identity theft insurance coverage can range from $20 to $60 per month.
Do you need identity theft coverage?
Considering how common identity theft and fraud has become and how affordable coverage is, getting identity theft insurance makes sense. And it makes even more sense when you have a high risk of having your personal information stolen, like in the circumstances listed below.
You’ve already been a victim
Once you’ve had your identity stolen, the odds of it happening again are pretty good. According to the Identity Theft Resource Center’s 2023 Consumer Impact Report, 69% of the general population has been the victim of identity crime on more than one occasion.
You work remotely
Working from home might make you more susceptible to cybercrime and identity theft. Most home internet connections pale in comparison to the security provided by a large company.
You operate a small business
Small business owners are one and a half times more likely to be victimized by identity thieves than the general public.
Identity theft coverage vs. credit monitoring
Your bank, credit card, or other provider may offer credit monitoring, perhaps even for free. Typically, this service alerts you whenever the company offering it notices something suspicious on your credit report. That information can be very valuable in stopping identity theft before it gets out of hand.
However, credit monitoring is not the same as identity theft coverage. Companies that offer credit monitoring usually don’t help you restore your identity or fix your damaged credit rating. You’ll also still bear the burden of paying the costs related to the theft.
How to file a claim for your identity theft
Filing a claim for identity theft is similar to filing a claim on other policies in that you want to connect with your provider and carefully follow its instructions carefully. You’ll likely need to support your claim with documents like:
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Evidence of credit cards taken out in your name.
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Bills for services and items that you didn’t buy.
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A police report.
You may need to collect additional evidence of your costs as you work to restore your identity, so start a file where you can store time cards that show missing work hours and any invoices for credit counseling and attorneys.
Another important step is to contact the company where the theft occurred. You may be able to get illegal credit cards canceled or money refunded once the business knows your identity was stolen.
Finally, be sure to alert the Federal Trade Commission (FTC). Filing a report with the FTC gives you evidence that your identity has been stolen that you can use should the thief continue to use your personal information.
How does identity theft happen?
Having coverage is just one part of protecting your finances from identity theft. The other is doing what you can to prevent the issue in the first place. Knowing how thieves get a hold of your personal information is a good way to start.
Skimming
Skimming occurs when thieves install devices on gas pumps, ATMs,and point-of-sale machines that accept bank cards. These illegal devices capture and transmit data and PINs to an unauthorized person for the purpose of fraud.
Mail theft
Some identity thieves steal mail from collection boxes or home mailboxes. There are even reports of mail delivery personnel being robbed during their rounds, all in an effort to find letters, credit card offers, and other private documents that may contain valuable personal information.
Stealing purses and wallets
The most valuable item in your purse or wallet may not be your cash or bank cards but your identification. While a well-intentioned person may return a lost wallet or purse, an intentional theft by a nefarious individual may not have such happy results.
Public internet access networks
Heed the warnings! Avoid performing banking or other financial transactions over a public WiFi connection.
Phishing
Phishing occurs when a con artist attempts to gain personal information through a fraudulent website, email, text, or phone call. In some cases, the bad actor goes so far as to make it look like an email comes from someone you know.
Frequently ask questions: Identity theft coverage
Is identity theft covered under home insurance?
Identity theft may be covered by your homeowners insurance policy. If it’s not, then you might want to ask your insurance agent about any possible endorsements. This is often an easy and cost-effective way to get the coverage you need.
How does identity theft insurance protect my credit?
Identity theft insurance can help protect your credit by giving you the financial resources to remediate the damaging results of identity theft. A policy plus credit monitoring services goes a long way towards mitigating your risk.
Can I get coverage after identity theft occurs?
Like other forms of insurance, you must secure identity theft coverage before experiencing the peril it protects against. You can't, for example, secure car insurance after experiencing an accident or flood insurance after flooding.
That said, you can take steps to better protect your information, such as:
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Not sharing personal information on your cell phone.
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Being aware of phishing attempts and fake websites.
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Shredding important mail and personal documents before disposal.
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Keeping your driver’s license, Social Security card, passport, and other identification secure.
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Watching for skimmers on devices that accept credit or debit cards.
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Securing medical and government records.
The importance of identity theft coverage
Identity theft is a tangle of frustration you should avoid at all costs. But should your personal information get stolen, then identity theft coverage can help provide the resources to help you recover .
Evaluate your risks and consider getting or adding identity theft insurance coverage to your homeowners insurance policy.
