Identity Theft Insurance: A Guide

In 2021 alone, the FTC received 1.4 million reports of identity theft.¹ Identity theft can happen in a number of ways, including in-person, online, over email or on the phone. However it occurs, identity theft affects a large number of people every year.

Fixing the damage caused by identity theft can cost the victim considerable time and money. That’s where having identity theft insurance can come in handy. Identity theft insurance can be used to help protect yourself against thieves, hackers and other criminal scammers. Here are some of the facts surrounding identity theft insurance so you can make the right decision when it comes to obtaining your own coverage. 

Long-Term Effects of Identity Theft

It can take months or even years to untangle the path of destruction left by identity theft. This can be difficult and stressful to deal with - especially if you don’t have insurance. You may recover some of the money stolen from you, but not all of the lasting effects will be financial. It can also lower your credit score, make it harder to get a loan and even affect your job prospects. 

Ultimately, you want to do everything you can to protect your identity by keeping your personal information safe. This includes making sure all your records, identification items such as your passport, social security card and birth certificate are all kept in a fireproof safe, and old banking records and statements are shredded. 

Regarding cybersecurity, keeping all your online information safe from hackers is important. Regularly update passwords, don’t allow other people to access your records and be careful about the information you share on social media. Criminals are always looking for personal information that may make it easier to steal or impersonate your identity. They could take out loans or open up credit cards in your name with the information they find online. 

What Does Identity Theft Insurance Cover?

Identity theft insurance will usually, at the most basic level, cover the monetary loss from the theft. It may also cover the cost of restoration services, including a case manager or fraud specialist who can help you recover your identity. 

The cost to replace your identification papers, such as your passport and birth certificate, will be covered also be covered, the cost of an attorney and your legal fees are usually covered under your identity theft insurance policy.

How To Get Identity Theft Insurance

Certain homeowners insurance policies, or even renters insurance, will offer a rider or you a rider or endorsement at an additional cost and act as an extension of your regular policy that covers identity theft. It might be an extra couple of bucks per month, but it will cover losses or other expenses typically not protected by your normal homeowner's policy. 

Before you decide to purchase identity theft insurance, it’s important to find out what the policy limits are, how much your deductible will be, how much money loss it actually covers and if legal fees or restoration services are included. The more comprehensive and complete the policy is, the more, the more you’ll be covered if identity theft happens to you. 

The IRS offers comprehensive information on handling different types of identity theft related to taxes. Tax-related identity theft happens when someone steals your personal information to commit tax fraud. Your taxes can be affected if your Social Security number is used to file a fraudulent return or to claim a refund or credit.²  The Federal Trade Commission also offers resources to assist in recovering from identity theft. Visit IdentityTheft.gov, the federal government’s one-stop resource to help you report and recover from identity theft.³