Identity Theft Insurance Can Help You Reclaim Your Life – Forbes Advisor

Imagine checking your credit report only to find an unfamiliar account. There’s a new credit card in your name, full of purchases you never made. You may be the victim of identity theft. Cases have been on the rise.

There were more than 1.4 million identity theft reports in 2021, according to the Federal Trade Commission (FTC) Consumer Sentinel Network Data Book. That’s a 3% increase compared to 2020 and a 414% increase compared to 2011.

Identity theft insurance is one tool you can use to help recover from identity theft. You may be able to add it to your homeowners insurance policy or purchase it separately.

Top 10 types of identity theft

What Does Identity Theft Insurance Cover?

Identity theft insurance can help you recover from the costs related to identity theft. For example, you can get reimbursed (up to your policy limit) for expenses you had in order to restore your identity. Some of the costs covered might include:

• Credit application fees.
• Notary and postage fees. This might include reimbursement for the cost of expedited shipping.
• Legal fees. This typically includes legal costs such as hiring an attorney to defend you against civil suits and criminal charges, remove civil judgments, and provide counsel at audits or hearings conducted by governmental agencies.
• Other financial institutions fees. This could include reimbursement for fees charged to your account relating to identity fraud.
• Lost wages. If you need to take time off work to take actions to recover from identity theft (such as meeting with your attorney), this coverage replaces lost income.
• Child care. This coverage helps pay for child care services while you take necessary actions to restore your identity.

Identity theft insurance typically only covers the expenses that happen after the identity theft occurs (like legal fees, lost wages and application fees). It won’t cover direct financial losses you incurred as a result of the identity theft, like fraudulent charges on your credit card statement.

In addition to reimbursing some of the costs associated with identity theft, some insurers offer the following.

Credit remediation and restoration

Because identity theft can harm your credit, some insurance companies connect you with a professional to help rectify your credit. For example, State Farm assigns you a case manager who will work directly with your creditors, credit bureaus, credit card companies and other financial institutions for up to a year after the incident. Working with a professional can help streamline the recovery process.

Credit or dark web monitoring

A credit monitoring service will watch your credit and detect fraud that might be happening. If suspicious activity is detected, it will alert you. Your service provider might also monitor dark web activity. The dark web has file-sharing sources, forums and other sources where identity thieves buy and sell others’ personal information.

How to Get Identity Theft Insurance

You can typically buy identity theft insurance from:

• An insurance company
• Identity theft protection service
• A credit card company

Identity theft insurance through an insurance company

Some insurance companies offer identity theft protection as an add-on to a homeowners, auto or renters insurance policy. For example, The AARP Homeowners Insurance Program from The Hartford offers an Identity Fraud Expense add-on to homeowners insurance with a coverage limit between $25,00 and $50,000. You’ll also have access to The Hartford ID Hotline and identity restoration services, which includes access to fraud specialists who can answer your questions.

Some insurance companies sell identity theft insurance as a standalone product. For example, Allstate’s Identity Protection plan can be purchased as a separate policy to provide monitoring services and reimbursement for expenses relating to fixing identity theft.

Identity theft insurance through an identity theft protection service

You can purchase identity theft insurance from companies that offer it as a service. For example, Experian offers an Identity Theft and Credit Protection Service, which provides dark web surveillance, credit monitoring, fraud resolution support and up to $1 million in identity theft insurance.

Here are the best identity theft protection services.

Identity theft insurance through a credit card company

Some credit card companies offer identity theft insurance with services similar to insurance companies and identity theft protection services. For example, Discover Identity Theft Protection offers services such as credit monitoring, dark web alerts, fraud resolution specialists and up to $1 million dollars for expenses such as lost wages, reimbursement for stolen funds and legal expenses.

How Much Does Identity Theft Insurance Cost?

As an example, Identity Restoration Insurance from State Farm is $25 a year for home, condo and mobile home insurance policyholders.

If you purchase identity theft insurance from an insurance company as a standalone product, you can typically buy it as a monthly plan. For example, Allstate’s Identity Protection plans start at $9.99 per month for individuals and up to $34.99 per month for a family plan.

There may be similar services from an identity theft service or a credit card company, so it’s a good idea to shop around. Experian’s Identity Theft and Credit Protection Service starts at $9.99 per month for the Experian IdentityWorks Plus package, or $19.99 per month for the premium package. Identity Theft Protection from Discover costs $15 per month for cardholders.

Do I Need Identity Theft Insurance?

With identity theft on the rise, you may want to consider coverage if it’s at a good price. Identity theft insurance might be worth it for you, depending on the cost of the plan and other benefits, like credit monitoring and access to fraud specialists who can help you untangle the mess.

More people filed identity theft reports with the FTC in 2021 than any other type of complaint.

If you’re a victim of identity theft, you could expect to pay fees and other types of expenses (including legal fees) to help restore your identity.

Identity theft insurance can help cover those types of cost, but it won’t help you repay direct financial costs as a result of the theft. That said, your responsibility for fraudulent credit card charges is limited to $50.

How to Report Identity Theft

If you are the victim of identity theft, the FTC recommends the following steps:

Contact the companies where the fraud occurred

You will want to contact the company where the fraud occurred. For example, if you have fraudulent charges on your credit card or bank statements, contact the company right away to dispute the charges. Your company will likely cancel your current credit or debit card and issue a new card.

If new accounts were fraudulently opened, call the company’s customer service department to close them. You may be required to provide a copy of a police report.

File a report with your local police department

You will want to provide your local police department with the following:

• A copy of your FTC identity theft report
• A government issued ID (with photo)
• Proof of your residency, such as a mortgage statement, utility bill or rental agreement
• Any other proof you may have of the identity theft, such as bills and IRS statements

Make sure you ask for a copy of the police report. You may be required to provide this to the company (such as your credit card company or bank) for disputed charges or newly opened accounts.

Report identity theft to the FTC

If you are the victim of identity theft, the FTC offers a free recovery plan. Keep in mind, this free plan doesn’t include services like credit monitoring, or pay for expenses like application or legal fees.

Place a fraud alert with credit bureaus

A fraud alert lets lenders know that you may be a victim of fraud and encourages them to take extra steps to verify your identity before extending new credit. It also lets lenders know if you are on active military duty.

Here’s how to place a free fraud alert with each credit bureau:

• Equifax: Online or by calling 1-888-Equifax (1-888-378-4329)
• Experian: Online or by calling 1-888-397-3742
• Transunion: Online or by calling 1-833-806-1627

Credit Monitoring, Identity Monitoring and Other Services

The FTC recommends you shop around for services that can address identity theft. Be aware of the differences in these two terms:

• Credit monitoring tracks activity on your credit reports, such as an account opened in your name, legal judgments against you, and changes to your personal information, such as name, address and phone number changes.
• Identity monitoring alerts you when your personal information, such as your bank account, Social Security number or driver’s license is used in ways that usually won’t show up in a credit report. This could include change of address requests, orders for new utility services, check cashing requests and payday loan applications.

The FTC warns that credit monitoring won’t catch certain types of behavior (like utility bills opened in your name), so it’s a good idea to look for a service that utilizes both types of monitoring.

10 Ways to Prevent Identity Theft

One of the most effective ways to fight identity theft is to be proactive. Here are some recommendations from the FTC:

1. Secure your Social Security number (SSN). Only give out your SSN when necessary and do not carry your Social Security number in your wallet.
2. Don’t share personal information such as your birthdate or bank account number. Don’t give your personal information to someone who calls, texts or emails you.
3. Collect your mail daily. If you expect to be away from home for several days, you can place a hold on your mail.
4. Review your bank account and credit card statements. Look for unauthorized transactions.
5. Store personal information in a safe place (such as a safe or safety deposit box). Shred receipts, account statements, expired credit cards and credit offers to prevent dumpster divers from getting your personal information.
6. Create complex passwords. Consider a password manager and pick security questions that only you know the answer to. If a company tells you there is a data breach, change your password right away and any account that uses a similar password.
7. Install virus-detection software and install firewalls on your home computer.
8. Review your credit reports annually. Check for accounts that you did not open. You can order your credit report for free from AnnualCreditReport.com.
9. Consider a free “credit freeze.” Also known as a security freeze, a credit freeze blocks anyone from accessing your credit reports without your permission. Since creditors can’t check your reports, this can stop thieves from opening accounts in your name.
10. Protect your phone and the data on it. Take steps such as locking your phone, regularly update your software, back up your data and use a program that helps you locate or erase a lost phone.