What is Identity Theft Insurance?
Identity Theft Insurance is a way to recover from losses occurred for restoring your identity from identity theft. It provides financial compensation to ID theft victims which is required in clearing their name from identity theft.
Identity Theft Insurance acts as a way to ease consumers’ worry about identity theft. People think that identity theft insurance policies work just like other insurance policies. The term insurance misleads many consumers to believe that the insurance policies will reimburse them for any loss that occurred as a result of identity fraud.
However, the fact is that ID theft insurance doesn’t cover your losses which you faced from identity fraud. Instead, it just pays for the costs which you incorporate to clear up your name from the fraud. As people are looking for different types of security from identity fraud, as a result, identity theft insurance is also growing in popularity. But, is the cost really worth?
How Can You Get Identity Theft Insurance?
There are various options for buying an identity theft insurance policy. These policies are sold through identity theft protection companies, insurance agents, credit card issuers, credit bureaus, credit unions, and banks.
In many cases, your home insurance covers up the theft of cash up to $200 and credit cards up to $50. Nowadays these policies also include coverage for identity theft as well. You can add ID theft insurance for about $25 to $50 per year if your home insurance does not include it.
What Identity Theft Insurance Covers?
According to the National Association of Insurance Commissioners (NAIC), the typical cost of identity theft insurance ranges from $25 to $60 per year. Most insurance policies have benefit limits ranging from $10,000 to $15,000. Also, many of them require you to pay the first $100 to $500 of costs required to restore your credit history.
The insurance usually includes account & credit monitoring, credit alerts, and reimbursement for the costs related with recovering your identity if you become a victim. Identity Theft Insurance may also cover expenses such as attorney fees, phone bills, mailing costs, and lost wages.
Reasons Why You Don’t Require Identity Theft Insurance
As more and more people are concerned about the security of their bank accounts, credit card fraud, the companies providing ID theft insurance are making use of this opportunity. Identity Theft Insurance providers are making huge profits with the insurance policies. However, the service they provide isn’t really worth paying for.
Here are some reasons why you don’t really need identity theft insurance:
- First of all, the insurance does not protect you from identity theft. Also, the insurance policy does not cover any monetary losses incurred from identity theft.
- ID theft insurance policies do not cover the legal expenses and time lost. Even if they are covered, the payouts might be limited and preapproval might be required.
- Several insurance policies say that they include access to your credit report along with credit alerts. However, you don’t need an insurance policy to check your credit report. You can access your credit reports online.
Other Ways To Protect Yourself From Identity Theft
Identity Theft Insurance can be used as a protection measure from identity theft, but the accompanying costs do not justify it very well. However, there are some other protection measures which you can take without investing in huge amounts.
- Make use of credit monitoring services. They are an alternative to identity theft insurance policies as they cost just about $10 per month. These services monitor your credit and alert you if a fraudster tries to open an account in your name.
- Review your online statements daily.
- Set up custom alerts for your bank accounts and credit cards to receive emails or text messages in case of any transaction.
- Check your credit reports from each of the three credit reporting bureaus Equifax, Experian and TransUnion, once every 3 months.
- You can also put a security freeze on your account which can help prevent a criminal from opening a new line of credit in your name.
- Some other free resources are also available. The Identity Theft Resource Center (ITRC) offers a free hotline for identity theft victims.