What is identity theft insurance and is it worth it?

Identity theft insurance helps pay to reverse the fraud, fix your credit score, and get your accounts secured — but it won’t cover the actual money you lost.

Kara McGinley

By

Kara McGinley

Kara McGinley

Senior Editor & Licensed Home Insurance Expert

Kara McGinley is a senior editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

Updated|3 min read

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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 in your policy. 

If it doesn’t, many insurers offer identity theft coverage as an endorsement that you can add to your homeowners insurance policy for a fee.

Key takeaways

  • 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.

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What is identity theft insurance? 

Identity theft insurance is a standalone insurance policy designed to help you recover your identity after fraud. Just keep in mind it 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).

If your home insurer already offers identity theft coverage, purchasing more might not be worth it.

It likely wouldn’t be worth it to get any additional identity theft insurance if your home insurance already covers it. And an identity theft insurer may not cover you at all if your homeowners insurance already does.

Does homeowners insurance include identity theft insurance?

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 to $25,000 in identity theft protection to your homeowners policy for an extra $25 to $60 a year.

Homeowners identity theft coverage also does not include monetary reimbursement.

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.

What does identity theft coverage cover?

The identity theft coverage that you can add to your homeowners policy helps pay for you to recover your identity — but not financial loss. It covers 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. It may also cover preventative services, like credit or digital footprint monitoring.

Many financial institutions have zero-liability and/or fraud monitoring policies.

Fraud monitoring is meant to 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.

Is identity theft insurance worth it?

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 by 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 $25,000.

  • How much can I afford to pay out of pocket? Identity theft can be an expensive loss. Consider how much you can afford to pay out of pocket on your own if you were to forgo identity theft coverage. 

  • Are there any caveats? For example, some identity theft insurers may not cover any lost wages that you incur.

5 homeowners insurance companies that offer identity theft coverage

Most major insurance companies offer identity theft coverage. Some may automatically include it in your policy or offer it as an endorsement.

1. State Farm

You can add identity restoration coverage to your State Farm home policy for an additional $25 a year. State Farm also offers cyber insurance that covers data recovery from cyber attacks.

→ Read our State Farm homeowners insurance review

2. Allstate

Allstate offers identity restoration services for an additional fee. It also includes credit monitoring services to monitor your credit accounts, social media accounts, and more. 

→ Read our Allstate homeowners insurance review

3. Nationwide

You can add identity theft insurance to your homeowners policy for $45 a year. Like Allstate, Nationwide monitors your accounts and pays for restoration services.

→ Read our Nationwide homeowners insurance review

4. Safeco

Safeco offers up to $25,000 in identity restoration coverage. Safeco also offers up to $5,000 in coverage for lost wages and child and elder care expenses due to identity theft. 

→ Read our Safeco homeowners insurance review

5. Geico

You can add identity theft coverage to your Geico homeowners policy. Geico offers prevention services, monitoring and alerts, and restoration services.  

→ Read our GEICO homeowners insurance review

How to prevent identity theft

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 of them.

  • Monitor your bank and credit accounts and set up fraud alerts.

Author

Senior Editor & Licensed Home Insurance Expert

Kara McGinley

Senior Editor & Licensed Home Insurance Expert

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Kara McGinley is a senior editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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