Every five seconds in the U.S.A., someone falls victim to identity theft. It’s a growing threat affecting Americans nationwide, and there’s no unusual activity that will put you at risk. Daily activities like banking, browsing websites, and shopping online are enough to put your personal information at serious risk.
No service guarantees your safety from identity theft. However, identity theft insurance offers financial aid if it does happen, mitigating at least some of the stress you will face during identity restoration. Understanding the ins and outs of this coverage can help you make an informed decision about your financial protection.
How Identity Theft Insurance Works
Identity theft insurance covers some of the expenses that typically come up if your identity is stolen. It’s not for preventing the theft itself—nothing really can—but it can mitigate some of the financial consequences. Restoring your identity can be time-consuming and expensive, with some complex cases even requiring legal help, which also means bearing legal fees.
Identity theft insurance works similarly to regular insurance, like car or home insurance. You get financial assistance if a fraudster steals your identity, but not all costs are covered right away. Depending on your insurance policy, you might need to bear a few expenses out of pocket during your restoration process. As long as those expenses are eligible, your insurance provider will reimburse you per your plan’s limits.
What It Covers
Identity theft insurance generally covers expenses incurred when recovering your identity. It’s not likely that the insurance will reimburse you for direct financial losses you face right after your identity gets stolen—losses like fraudulent credit card charges and stolen funds.
Here are some of the common expenses that are covered, depending on the specific policy:
- Lost wages
- Legal fees
- Credit agency fees
- Bank fees (charged due to fraudulent activities)
- Notary fees (to obtain certified copies of your personally identifiable information documents)
- New document expenses
- Postage costs
- Childcare expenses (if paid while restoring identity)
- Counseling fees
- Other financial expenses (such as loan reapplication fees)
Should You Get This Insurance?
This completely boils down to your risk tolerance and the troubles you’re willing to face if you do face identity theft. Remember, reclaiming your identity is a tedious and costly process, and insurance eases some of the burden so you can return to your everyday life quicker.
Of course, insurance can be expensive too, so you’ll want to weigh up the advantages of getting it. So, here are three things to determine if you really need it:
1. Do You Already Have Coverage?
Sometimes, your credit card, home/renter’s, or personal insurance policy may already offer some type of identity theft insurance. So, first, check if you have that. If yes, it might not make much sense to opt for this insurance unless it doesn’t meet your needs or offer the level of coverage your situation requires.
2. Can You Navigate It Yourself?
As mentioned earlier, reclaiming your identity can be expensive. There are multiple expenses involved, and that’s not all. The process will also include liaising with legalities and authorities, recovering documents, setting up new accounts, and much more. If you are willing to navigate all this bureaucracy, you can skip getting insurance.
Sure, you can take certain steps, like monitoring your credit reports, freezing your credit, checking accounts regularly for suspicious activities, and so on. But these are precautionary, and if you unfortunately fall victim, insurance can help cover expenses so you don’t have to bear the brunt of it all.
3. Are You at Risk?
Given how much we communicate digitally, we are all at risk of identity theft. But how you protect your information can help mitigate the chances of it happening to you. Check the following:
- Do you use two-factor authentication to log in to your accounts?
- Do you have strong passwords?
- Do you safely store all your important documents?
- Are you safeguarding your personally identifiable information (PII)?
Wrapping Up
From your credit score plummeting due to fraudulent activity to falsified tax returns under your name, there’s a lot that can go wrong if your identity is stolen and you don’t act on time. Consider investing in a robust identity theft protection service that not only offers insurance but also monitors your information to alert you immediately in case of any threat.
