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Identity theft insurance is designed to help victims of identity theft get back on their feet. You can buy a standalone identity theft policy, but your homeowners insurance may include identity theft protection already.
Published August 17, 2020
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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. The good news is that you can buy an identity theft insurance policy to help protect you from the extensive harm identity theft may cause.
That said, you may not need to purchase a standalone identity theft policy, since your homeowners insurance may already include identity theft protection, or it may be offered as an endorsement that you can add to your home insurance policy for a fee. This type of coverage is designed to help you recover from fraud and get your identity back.
KEY TAKEAWAYS
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 — anything from a person’s 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:
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Identity theft coverage is typically offered as an endorsement that you can add to your homeowners or renters insurance policy, however there are standalone identity theft insurance policies available, too. 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 usually does not include monetary reimbursement. For example, if someone runs up a credit card bill in your name, your identity theft insurance 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 insurance 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.
Identity theft coverage pays for vital identity restoration services that you may need when trying to get your identity back, such as:
Basically, identity theft coverage helps you pay for all the services that come with getting your identity back and fixing your credit score, which can be an overwhelming and expensive process to do on your own.
Identity theft insurance 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.
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:
Your identity can get 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.
Kara McGinley
Property and Casualty Insurance Expert
Expertise
Kara McGinley is an insurance editor at Policygenius, specializing in home, auto and renters insurance. She previously worked as a freelance writer and copywriter, and has been writing about insurance since 2019. Kara is an expert at making complicated topics like property insurance simple to understand. Her work can be found in Teen Vogue, The Culture Crush, and more.
Education
Kara has a B.A. in English from East Carolina University.
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