Is Identity Theft Insurance Worth It for You?

by Mike Murphy

It’s a harsh reality…

Our identity can be stolen at any time without warning.

That’s why, every year, millions of Americans look for some form of identity theft insurance as a way to protect themselves.

It’s no longer enough to just keep an eye on our credit cards and bank accounts. Today, we need more than that.

Many of us already have health and property insurance as a foundation to protect ourselves.

The question now is… should I get identity theft insurance, or should I get some other form of protection?

This guide helps you answer those questions and more.

We review what types of identity theft insurance are available to you, what these policies cover, the costs associated with the coverage, and whether this kind of insurance is worth it for your situation.

First, you need to know what’s available.

Types of Identity Theft Insurance

There are 2 types of insurance for identity theft available to you:

1. Insurance from a traditional insurer
2. Insurance from an ID protection company

What is the difference between identity theft protection and insurance?

Simple…

Identity theft insurance is passive and only goes into effect after the theft has occurred.

ID protection is active and helps protect your ID all month long.

Those are the main differences between the two.

Many people have the false impression that insurance covers any money you lose from the theft. But that’s not true.

Insurance does not cover any money that was stolen from your bank accounts or credit cards as a result of the identity theft.

And you also don’t get any monthly monitoring of your personal info.

But you do get the monthly monitoring with ID protection services.

Many of the firms that offer monthly identity theft protection services will give you the insurance for free if you sign up for one of their plans.

This means you get the same type of ID theft insurance that a traditional insurer would give you, plus you get proactive monitoring of your personal info every single month.

It’s 2 protections instead of one.

That’s why we advise people to get the active protection and insurance.

You get the best of both worlds… monthly protection and yearly insurance.

What Does Identity Theft Insurance Cover?

Identity theft protection insurance is as its name suggests and is created to protect and reimburse you when your identity is stolen.

These policies aim to help you recover some of the costs you might incur when reclaiming your financial identity, as the process may be costly, tedious and time consuming.

But you won’t get reimbursed for any direct monetary losses caused as a result of identity theft.

These policies also can’t prevent you from becoming a victim of ID theft.

The coverage only kicks in after the theft happens.

So what would the insurance cover?

Any required paperwork
Phone Bills
Wages lost
Notary fees
Childcare costs
Mailing surcharges if any
Credit monitoring services
Fees incurred in getting legal help

What each insurance company will cover depends on the policy you sign up with. Some insurers will cover some of the costs listed above but not all of them. And there are limits as to how much each policy covers.

Most policies on average cap coverage at around $10,000 to $15,000.

Any costs incurred exceeding these amounts will not be reimbursed, and there may also be a deductible required before your losses are insured.

These policies only help you to recover a portion of the expenses you might have incurred due to the identity theft incident while providing you with any advice you may need to guide you through your identity restoration process.

Identity Theft Insurance Cost

So how much is identity theft insurance going to cost you?

If you get insurance for identity theft through a traditional insurer, your costs will be around $50 per year. If you get your insurance through ID protection services, you will be paying a monthly fee.

The pricing models vary with each company. And you need to make sure you know exactly what’s in the policy.

Here’s some examples for the cost of identity theft insurance you can expect to pay…

Traditional Insurers

With insurance from traditional insurers like Nationwide and State Farm, you get ID theft insurance coverage for around $45.00 per year.

But you don’t get proactive ID monitoring every month. You’re just covered for the expenses you incur after the theft happens.

To get this coverage, you must already be a customer of the insurance company and have a home, renters, condo or RV insurance policy with them.

Identity Protection Firms

With insurance from companies that specialize in identity protection, you get active monthly monitoring of your personal info to go along with ID theft insurance.

These firms usually offer 3 different plans which can be customized to cover one or more individuals.

Individual plans range from $7.00 to $25 per month and family plans range from $12.50 to $33.33 monthly. The most important thing to remember with this option is that you get ACTIVE protection month after month.

As you can see, your costs, protection, and coverage vary with the 2 different types of insurance.

With the insurance only option, you pay a lower fee once a year.

And with the ID protection option from a company like Identity Guard, you pay every month but get more protection and ID monitoring to go along with your insurance coverage.

So how much is identity theft insurance going to cost you?

The pricing models vary with each company. And you need to make sure you know exactly what’s in the policy.

Here’s some examples for the cost of identity theft insurance you can expect to pay…

What to Look for In Identity Theft Insurance Policies

Before purchasing any insurance policies, there are many factors to take into consideration before making your decision.

That’s especially true when searching for the best identity theft insurance policies.

There are certain factors that you should consider before going through with your purchase.

First, it is important to understand what the various policies cover and reimburse. Not every policy covers legal costs incurred, which could be an important decision-making factor for you.

You may also want to spend more time trying to understand the fine prints and how the policy reimburses you for your lost wages in the event of identity fraud.

There could also be additional fees that come with the policy that helps you detect suspicious activity as part of credit monitoring included in the policy.

Secondly, is the comparison of policies based on their price and what they offer. According to the Consumer Federation of America (CFA), here’s a list of items you should consider before finalizing your decision:

Policy Limits
Deductibles (If any)
Limits and triggers for covering lost wages
Approval process for legal work that could possibly be covered
Cost and terms before any commitment

What else should you look for?

Privacy policies:
These services should explain and clearly mention the information that they collect from you, what they do with it and how they distribute or destroy it. And do they show it to other people. You must get a full understanding of how much control you have over your own data.

Does the company lie about their success rate:
As mentioned earlier, these policies cannot prevent your personal information from being stolen or fraudulently used. So no insurer should claim they can. If they do claim they can fully prevent ID theft, then you probably aren’t dealing with a reputable company.

Should You Buy Identity Theft Insurance?

Whether identity theft insurance is worth it depends on your personal circumstances.

If you were once a victim of identity theft, thieves may still have access to your personal information which could lead to other acts of fraud under your name.

That will ultimately lower your credit score and hurt your ability to obtain loans at favorable rates. That’s why these policies would be worth considering.

But if your going to pay for insurance, why not go one step further and protect yourself day-after-day… month-after-month?

When you pay for protection and not just insurance, that’s exactly what you get.

The services of ID protection companies monitor your personal info every single month. And when they notice something irregular going on with your personal info, they alert you.

That’s a big improvement over just getting insurance. And it’s something you really need to take into account.

These are a few of the important facts you need to consider when asking yourself “should I get identity theft insurance?”

Final Thoughts

Protecting yourself against identity theft is becoming more important in today’s harsh reality of theft, fraud, and computer hacks.

We all need to guard our personal information in a smarter way with state-of-the-art resources and technology.

Getting identity theft insurance on top of monthly protection is the most logical way to get maximum security.

You also know the costs and benefits. It’s now up to you to decide whether this type of coverage is right for your situation.

If you’re still thinking about buying insurance only, keep in mind that

Just remember that although ID theft insurance offers you certain benefits, no product can completely prevent you from becoming a victim of identity theft.

In fact, insurance only starts to help you after a thief steals your info. And even then, you only get reimbursed for the expenses you incur from trying to repair the damage the theft has caused.

We personally recommend going with the monthly protection that includes insurance. It costs a little more but gives you the maximum amount of security.

So instead of being passive and reacting to theft committed against you, you’ll be proactive and take the initiative of protecting yourself on a monthly basis. Insurance alone can’t accomplish that.