Identity theft insurance is a type of add-on or standalone policy that can give individuals peace of mind that they are protected against this growing consumer crime. Finding a way to protect yourself against this form of fraud is important.
About Identity Theft Insurance
Identity theft is a type of fraud in which a thief impersonates another person to use the victim's personal financial information. According to the Justice Department, some 3.6 million households were victimized by this type of fraud in 2006. This insurance specifically provides protection against the risks of identity theft.
Policies differ from one carrier to another, but most policies are standalone insurance plans. You may be able to add this insurance to your homeowners insurance policy though, in some cases. Before you sign up for a service, understand what it does and does not cover.
What It Covers
Identity insurance provides coverage for some of the results of identity theft. Depending on the terms of your policy, this coverage may reimburse you for the following expenses:
- Costs associated with filing legal action against thieves
- Costs associated with making calls and mailing documents related to the theft
- Costs of missing work to handle financial matters directly related to the theft
- Costs of hiring an attorney
Policies can also limit the amount of a claim related to the policy. Most coverage limits range between $10,000 and $15,000, according to the National Association of Insurance Commissioners. These policies also have a deductible, which means the victim must pay the first $100 to $500 of the costs incurred before the coverage will kick in to pay the rest, depending on the amount of the deductible.
What It Does Not Cover
Most insurance plans do not provide coverage for the monetary losses suffered as a direct result of the identity theft. If a thief steals your credit card and makes purchases on it, the insurance policy does not refund those costs to you or your lender. In addition, the policy does not stop you from becoming a victim of identity theft.
The limitations a policy has may not be directly outlined in the policy. The policy provider will outline specific coverage that is available. If you are not sure if a specific service or type of claim is fully covered under the policy, ask for clarification from the insurance provider before you purchase the plan. Be sure you understand the limitations of these policies.
Before You Buy
Before you invest in identity theft insurance, take the time to consider the value of this policy for your particular needs. Also, consider these factors.
- Check your credit card agreements to determine if you are liable for charges made by someone else. Many lenders extend coverage to prevent you from being responsible for the thief's actions.
- Read all documentation about the policy. Know the details of the policy, how to make a claim and when you cannot use it.
- Learn what restrictions apply towards claims, including claim limits.
- For policies that offer legal coverage, determine if the insurance provider must pre-approve all legal work.
- Salaried employees or those with vacation time may not be able to file lost wages claims with some insurance providers. Find this out from the policy carrier.
- Learn the costs associated with the plan, including the deductible level and annual fees.
- Find out if your homeowner's insurance company already covers these costs. It may be built into your policy already.
Discuss your needs for identity theft insurance with your attorney if you are unsure if a particular policy is right for you. Keep in mind that a variety of organizations offer this type of policy, including some financial institutions, credit card companies and insurance companies, so you can definitely shop around.