Do You Need Identity Theft Insurance?

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 Getty Images/George Diebold

Recent research studies show 60 million Americans have been a victim of identity theft amounting to financial losses in excess of $16 billion. Anyone can become a victim of identity theft. Common types of identity theft include:

  • Social Security: Social security theft is very common and is also very dangerous. Once a thief has stolen your social security number, he has access to almost everything about you. The thief can use your social security number to forge documents and even open credit card accounts.
  • Financial Identity: If you ever use your bank account number or credit card number online, a thief may be able to steal this information and charge all sorts of purchased to your card. It can be a long and difficult process to get these charges reversed.
  • Tax Identity Theft: Tax identity theft occurs when some files a fraudulent tax return under your social security number. If your tax return is rejected by the IRS, it could be because someone has already filed a fraudulent federal tax return in your name.
  •  Criminal Identity Theft: Someone could commit a criminal act using your identification such as a driver’s license. The theft may remain undetected until you at some point apply for a job and failed a background check.
  • Insurance ID Theft: If someone gains access to your insurance ID information, they can receive medical treatment which is then billed to your insurance provider.

Identity Theft Insurance Policy Features

Identity theft insurance provides protection if your identity is stolen and helps you recoup some of the expenses involved in trying to restore and repair your credit. You should note that identity theft insurance doesn’t reimburse you for money that was stolen from you but rather pays for expenses incurred because of identity theft through reimbursement payments. Policy specifics vary based on the insurance company, but commonly covered expenses include:

  • Cost of obtaining credit reports
  • Credit monitoring services
  • Long-distance telephone expenses
  • Lost income
  • Legal costs

Preventing Identity Theft

Be vigilant in preventing identity theft by keeping personal sensitive information secure including your social security number, banking information, birth date, passwords and user IDs. Monitor your credit report closely for any changes through the free credit report services offered by the major credit reporting agencies. If you discover fraudulent charges, consider putting a freeze on your credit report.

Who Offers Identity Theft Insurance?

If you decide that identity theft insurance may offer you the protection you need, there are several insurance companies that offer some form of identity theft coverage. Here are a few to consider.

#1 Nationwide

Nationwide offers identity theft protection for only $45 per year. You can add identity theft protection to an existing auto, home, renters, condo or RV Nationwide policy. You will be reimbursed for up to $25,000 for out-of-pocket expense. There is also a team of resolution specialists available 24/7 to help you through the process of restoring your identity and credit. Monitoring services are available to notify you of any fraudulent activity detected involving your social security number, email address, passport, date of birth, driver’s license, debit/credit cards or banking information.

#2 Liberty Mutual

Liberty Mutual offers the services of its Identity Fraud Crisis Resolution Center whenever any fraudulent activity is detected. The team will contact credit agencies on your behalf and help in filing any necessary reports. In addition, the team will immediately notify the three national credit bureaus (TransUnion, Equifax, and Experian) whenever fraudulent activity is detected. Liberty Mutual reimburses expenses up to $15,000 per occurrence and $30,000 per policy term for these expenses: attorney fees, long-distance telephone calls, loan application fees, lost wages, and mailing and notarization costs.

#3 State Farm

State Farm’s Identity Restoration Insurance Policy costs just $25 per year and can be added to an existing home, apartment, condo, mobile home or farm policy. The coverage includes you and any spouse, relatives or dependents under 21 living in your household. You will have a dedicated case manager who will work with credit card companies, credit bureaus and any financial institutions for up to a full year in resolving a covered incident. State Farm reimburses you for expenses up to $25,000 for expenses including application filing, credit reports, bank fees, defense costs, notarization costs, telephone charges, postage, and defense costs for any civil suits.