It can take years for victims of identity theft to recover from the fraudulent charges made in their name. Identity theft can cause long lasting problems and affect a myriad of circumstances in your life — be it damage to your credit score or your personal reputation.
Identity theft is becoming all the more common the more we put our financial lives on the internet, and hackers continue to get more creative.
If you’re looking to protect yourself from the risk of identity theft, you can buy an identity theft insurance policy. However, you may not need to if your homeowners insurance already includes identity theft protection. If it doesn’t, many insurers offer identity theft coverage as an endorsement that you can add to your policy for a fee. This type of coverage is designed to help you recover from fraud and get your identity back.
Your homeowners insurance policy may include identity theft coverage, or you may be able to add it as an optional endorsement to your policy
Identity theft coverage helps pay to reverse the fraud, fix your credit score, and get your identity back, but it does not cover direct monetary losses
If your bank account or credit card gets hacked, your bank or credit card company are typically responsible for reimbursing your monetary losses
Identity theft is the act of stealing someone’s personal information — like a bank account number, Social Security number, or credit card — and using it to impersonate that person. Identity theft can result in major financial problems for the victim, because thieves may open credit cards in their names, hack a bank account, obtain unauthorized loans, and even impersonate them online. There are various ways your identity can be stolen. Some common occurrences include:
Stolen physical documents, like a Social Security card, government-issued photo I.D., or credit card
Hacking, either your email, phone, mobile apps, bank account, and more
False phone calls or emails, like a phishing email, or someone pretending to be a trusted source over the phone. For example, someone may call and coax sensitive information out of you by pretending to be the IRS.
Ready to shop home insurance?
You may not need to buy a standalone identity theft insurance policy because identity theft coverage is typically offered as an endorsement that you can add to your homeowners or renters insurance policy. Depending on your insurance company, you may be able to add up to $15,000 in identity theft protection to your homeowners policy for an extra $25-$60 a year.
It’s important to note that this coverage, like standalone identity theft insurance, does not include monetary reimbursement. For example, if someone runs up a credit card bill in your name, your identity theft coverage typically won’t cover paying you back — credit card companies and banks are the ones who are responsible for reimbursing you if your cards get stolen or your bank account gets hacked. Identity theft coverage pays for identity restoration, meaning it helps reverse fraud, so in this case it’d cover the cost of a specialist who’d help you recover and reinstate your original credit score.
The identity theft coverage that you can add to your homeowners policy helps pay for you to recover your identity. Like a standalone identity theft insurance policy, identity theft coverage covers the cost of vital identity restoration services that you may need when trying to get your identity back, such as:
The cost of a case manager or consumer fraud specialist
Replacement of government issued identification
Reimbursement of attorney fees if you take the perpetrator to court
Assisting with civil suits and criminal cases
Resolution services to help reclaim identity and restore credit
Reimbursement of administrative fees and expenses
Basically, identity theft coverage helps you pay for all the services you’ll need to get your identity back and fix your credit score, which can be an overwhelming and expensive process to do on your own.
Identity theft coverage primarily covers the costs associated with reversing and recovering from fraud, not the fraud itself. If your money is stolen from your bank account or by credit card fraud, it’s your bank's responsibility to reimburse you for it.
Many financial institutions have zero-liability and/or fraud monitoring policies in place that minimize the odds of you losing out on your entire bank account. Some identity theft insurers may cover the loss of electronic funds, but this is only if your bank won’t pay you, though in most cases the bank is legally required to.
Identity theft insurance is a standalone insurance policy designed to help you recover your identity after fraud. It’s a separate policy from home and renters insurance, so if you do not have either type of insurance, a standalone identity theft policy may be a good option. It contains similar coverage to identity theft coverage on a homeowners policy, meaning it can help pay to restore your identity, but it similarly does not pay for any stolen money or other forms of financial loss.
For example, identity theft insurance may pay for a credit report, notary fees, or postage fees that you accrue while trying to reinstate your identity, but it won’t reimburse you if $500 was fraudulently stolen out of your bank account (your bank will typically cover this loss).
Your identity theft insurer may not cover you if your homeowners insurance already does, which is why it might not be worth getting additional identity theft insurance if you already have identity theft coverage through your homeowners insurance.
If your homeowners insurance already includes identity theft coverage or offers it as an endorsement, you likely don’t need to go out and buy a standalone policy. There’s also a chance you have coverage through your employer as identity theft insurance is an increasingly popular workplace benefit.
It’s never a bad idea to have more protection, but you should research identity theft policies before purchasing one, as coverage varies from insurer to insurer.
Some factors to keep in mind when shopping for identity theft insurance:
What are the policy limits? Some insurance companies may only offer up to $10,000 in protection while others may offer up to $15,000
Is there a deductible? You may have to pay your insurer a set a deductible before they will help pay to restore your identity
Are there any caveats? For example, some identity theft insurers may not cover any lost wages that you incur
Your identity can be stolen at no fault of your own, but there are several proactive steps you can take to try to prevent fraudsters from getting easy access to your personal information.
Avoid carrying your Social Security card or passport with you unless you need it that day
Guard your credit card when making purchases
When using ATMs, be careful that you aren’t revealing your PIN code to those around you and always take your receipt
Don’t give out personal information over the phone unless you know the line is secure, especially if you are in a public place as people around you may overhear
Proceed with caution when shopping online and saving your credit card to certain websites
Change passwords every few months and make sure your computer security is up to date
Beware of phishing schemes
Shred documents with personal information before disposing them
Monitor your bank and credit accounts and set up fraud alerts
There are eight different types of homeowners insurance policies for various home types and coverage needs.
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