Although you take extra care when disclosing personally identifiable information (PII), you know that no one can wholly avoid identity (ID) theft. Anyone can be a victim.
In extreme cases, you might even struggle to lease a decent home. And as the provider of your family, you can’t risk losing your job, credit line, and, of course, your house.
For these reasons, you look into identity theft insurance. It would help to have some form of security net against ID theft losses.
Your bank might have offered identity protection coverage before, but you likely ignored it if you don’t know much about insurance. Fortunately, this guide can help you find a suitable policy.
We believe in the importance of identity theft insurance. However, we also understand that its scope, practicality, and value heavily depend on your insurer.
And to help you get the best ID theft coverage, our team scoured official insurance resources, independent review sites, and forum threads focused on identity theft insurance. After reading, you’ll know what you need.
Please read without skipping! We’ll tell you a common yet impractical mistake many commit when getting identity protection coverage. Otherwise, you won’t maximize your policies.
Let’s dive into our ID theft insurance guide!
Everything you need to know about identity theft insurance
Before diving into the textbook definition of identity theft insurance, let’s talk about the risks it protects you from.
Identity theft involves the illicit use of stolen PII. Criminals can abuse your personal information to evade crimes, open credit lines, apply for loans, and take out tax refunds, among other fraudulent transactions.
What makes ID theft more challenging is it’s a faceless crime. Although the Federal Trade Commission (FTC) prohibits debt collectors from charging ID theft victims, you can’t just walk away scot-free.
You won’t shoulder fraudulent debts. However, you’re responsible for repairing your credit score, clearing fraudulent transactions, and filing lawsuits—which end up costing hundreds of thousands depending on the situation.
And this is where identity fraud insurance comes in. Identity theft insurance providers pay off some of the expenses stemming from identity theft-related cases.
We’ll flesh out the coverage and limitations in the next section. However, to give you an idea, most policies reimburse the money you pay for credit repair, attorney consultations, notarial acts, and credit monitoring.
Moreover, the benefits can last months to years. You can keep reimbursing qualified expenses from your policy as long as you don’t hit your coverage limits.
Identity theft insurance coverage and limitations
Insurers set different coverage limitations. However, you’ll find that most identity theft insurance policies cover the following:
- Credit Monitoring and Repair: Insurance covers the cost of credit repair. Many credit monitoring companies like Aura and LifeLock even offer ID theft insurance coverage, which could go up to $1 million.
- Legal Service Fees: Expect to file several lawsuits if your PII was compromised in a data breach. Although you might get a settlement award, you’ll have to spend several grand on attorney appearance and consultation fees. Fortunately, ID theft insurance covers these expenses.
- Daily Administrative Fees: Small, daily expenses like long-distance calls, document processing, and notarial acts could rack up to thousands, depending on how long your case lasts. You’d benefit from reimbursing them through insurance.
- Report Processing: After placing a fraud alert on your credit, you can get up to two free credit reports per annum. It costs around $14 to request more. Luckily, ID theft insurance covers these fees so that you won’t hold back on requesting as many copies of your credit reports as you need.
Identity theft insurance covers several fraud-related cases. Unfortunately, you can’t rely on them for the following:
- Lost Bank Account Funds: Debt fraudulently transferred out of your accounts aren’t covered by ID theft insurance. Thankfully, the Federal Deposit Insurance Corporation (FDIC) requires banks to insure each depositor for up to $250,000, although you have meager chances of getting claims approved.
- Fraudulent Debt: ID theft insurance doesn’t absolve debt incurred on fraudulent accounts, although the FTC states that you won’t have to shoulder these. If any collector harasses you, file a complaint against their company.
- Stolen Government and Health Benefits: Insurers can’t reverse stolen benefits. You’ll have to contact the institution involved if a criminal misuses your PII to steal tax refunds, insurance claims, or investment returns.
Use other insurance policies and cybersecurity services to compensate for the limits of ID theft policies. Card-issuing banks, lenders, and insurers should help you fill any deficiencies.
The importance of identity theft insurance
Identity theft insurance plays a crucial role in cybersecurity. For example, if a criminal misuses your personal information for fraudulent transactions, ID theft insurance will cover much of your expenses.
With no financial constraints, you won’t hesitate to take action. We read several reviews where victims doubted reporting potential ID theft because they felt bad about “wasting money.”
As a result, their PII got further compromised. Remember: time is of the essence in preventing identity theft, and you can’t dawdle hesitating or doubting your choices.
How does ID theft insurance help victims
The financial burden following identity theft feels taxing. Most victims find themselves overwhelmed by a wave of emotions, including rage, hopelessness, and desperation.
Insurers can’t support victims with their mental health. However, they can make the recovery process significantly easier through financial support.
Put yourself in the victim’s shoes and imagine you’ve already lost money to fraud. The last thing you’d want is to shoulder more expenses.
Trust us—you’d be more at ease with filing lawsuits, requesting paperwork, and getting credit monitoring services if your insurance covers your expenses.
Deciding whether to get identity theft insurance
Identity theft insurance is crucial to cybersecurity. However, you can’t blindly sign up for the first policy you come across; otherwise, you won’t get the protection you need.
Some factors to consider when shopping for identity theft insurance include the following:
- Policy Limits: Always check the policy limits available. Most insurers stop at around $100,000 worth of coverage, but widely known and trusted companies have plans as high as $1 million.
- Deductibles: See if you have to pay deductibles. You’d need a significant amount of cash to shoulder the ID theft restoration fees out of pocket.
- Special Features: Some policies cover extra expenses involving child care, labor loss, and credit repair.
- Monthly Premiums: Most companies charge less than $5 per month for up to $1 million worth of coverage.
Compare at least three to four insurance providers before making your decision. Dozens of companies and financial institutions offer identity theft insurance, so don’t limit yourself.
Identity theft insurance rates
Insurance rates vary based on your state and insurer. However, you can generally expect $25 to $50 per annum for a standalone policy worth $1 million.
To manage your expectations, we want to stress that most companies sell ID theft coverage as an add-on service. For instance, if you sign up for credit monitoring and insurance, your annual premiums might reach $200.
Nonetheless, we believe it’s a small price for protection. Insurance minimizes after attacks, but you should still endeavor to secure your personal information through routine PII tracking.
For more accurate computations, you can request sample quotes and estimates from your insurance providers.
Ways to get identity theft insurance coverage
Identity theft insurance is available as a standalone policy or endorsement. In most cases, insurers offer identity protection coverage as a rider to homeowner’s and renter’s insurance policies.
Based on our research, many newbies think standalone policies provide better protection than riders. Unfortunately, this misconception prevents you from maximizing your protection.
Use identity theft insurance coverage as an add-on for a service you already need. In most cases, you can get it for free with password management, credit repair, and dark web monitoring, among other identity theft prevention services.
Also, look into the policy’s coverage. Avoid cheap plans with low coverage limits, stringent restrictions, and super-specific requirements.
Top identity theft insurance providers
Vetting all the companies offering ID theft insurance might make your head spin. Luckily, we made a brief list of widely known and trusted insurers—which you can use to jumpstart your research.
- Aura: It offers a one-stop-shop solution to data privacy. For $12 a month, you’ll get $1 million worth of insurance coverage, PII tracking, credit monitoring, plus various digital tools (i.e., antivirus software, VPN, password manager).
- Identity Guard: The company offers the most value for its insurance. A $1 million coverage only costs $7.20 a month, but it already comes with credit monitoring and identity theft prevention.
- ID Watchdog: Unlike other ID theft prevention companies, it focuses on identity restoration. The cheapest plan starts at $14.95 a month. Although pricey, the coverage also comes with a dedicated case manager who will guide you through post-attack recovery and restoration.
Feel free to explore other insurers. However, extensively examine their products to ensure that you can entrust them with your personal information and data privacy needs.
Identity theft insurance alternatives
Although insurance has no free alternatives, you can minimize your expenses by getting a standalone policy. In this case, you’ll do ID theft monitoring yourself by:
1. Using free resources
Use free password managers, antivirus software programs, dark web monitoring tools, and password strength checkers to bolster your cybersecurity.
2. Requesting credit reports
You can request one free credit report from each credit bureau every year. Bureaus charge around $14 for extra reports.
3. Placing fraud alerts
You can place an initial fraud alert on your credit reports for free. For one year, financial institutions must probe all transactions using your PII and verify your identity.
Once you file an identity theft report with the Federal Trade Commission (FTC), you can extend the fraud alert for seven years. You also won’t have to pay for anything.
4. Setting up a credit freeze
If you don’t think a fraud alert is enough, you can freeze your credit line altogether. After setting up a credit freeze, credit bureaus can no longer release your credit reports to any financial institution.
5. Staying wary of the signs of identity theft
Watch out for warning signs indicating identity theft. Contact the appropriate institutions immediately if you receive a fraudulent court summons, criminal reports, unpaid bills, or loan applications.
Bolstering your data privacy with insurance
Overall, we think ID theft insurance is a solid investment. If a criminal misuses your PII, you can rest assured that your policy will mitigate the damages and reimburse your losses.
Of course, you should still endeavor to secure your personal information. On most days, insurance just gives you the peace of mind that you won’t go bankrupt if an identity thief attacks you. But, again, prevention is better than cure.
Also, remember that identity theft insurance only supports cybersecurity. As mentioned above, the best way to maximize it is to pair it with credit repair, dark web monitoring, password management, or another insurance policy.