Identity theft is a common problem affecting millions of Americans. In fact, according to a 2016 Bureau of Justice Statistics survey, approximately 10% of people over 16 reported that they’d been the victim of some type of identity theft in 2016.
There are many types of identity theft. Often, the perpetrator misuses your personal information to open credit cards in your name or gets hold of your existing credit cards and makes unauthorized charges. Whatever form it takes, identity theft could cost you money and time.
To protect against losses, some companies offer identity theft insurance. But is this type of insurance coverage worth buying?
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What is identity theft insurance?
Identity theft insurance is an insurance policy that provides protection in case someone steals your identity. Insurance providers typically promise to help you prevent identity theft and to cover your costs if you do fall victim to fraud.
Identity theft insurance can sometimes be purchased as an add-on to your homeowner’s insurance coverage. You can also buy it from companies that provide credit protection services or from insurance providers in your state.
The costs vary, but policy premiums can start at under $10 per month and go up to around $50 monthly for the most comprehensive protection.
What does identity theft insurance cover?
Identity theft insurance coverage varies depending on the provider and level of coverage. Your policy may include:
- Credit report monitoring.
- Alerts if new accounts are opened, or if a new public record is placed on your report, or if any negative information appears, or if there’s any suspicious activity on your credit report.
- Reimbursement for costs associated with identity theft, including fraudulent charges and the cost of time taken off work, or money spent paying an attorney to resolve problems caused by the misuse of your personal information.
Your costs will be covered only up to the limits of your policy. Many policies cap coverage at around $10,000 or $15,000, so you’ll be on your own if your losses and fees exceed this amount. Your policy may also have a deductible you’d be required to pay before your insurer begins covering losses.
Should you get identity theft insurance?
Although you should take steps to protect yourself from identity theft, this insurance usually isn’t worth buying. This is partly due to the fact that identity theft isn’t likely to cause you out-of-pocket financial loss — even though dealing with it can be a hassle. In fact, the Bureau of Justice Statistics revealed that 88% of identity theft victims suffered out-of-pocket financial losses of less than $1.
Out-of-pocket losses tend to be low because credit card companies and banks already provide fraud protection guarantees for free. As long as you report fraudulent charges or other suspicious account activity in a timely manner, your bank or card issuer may refund you in full, or you may be responsible for only a small percentage of the loss that resulted from the fraud — usually $50 or less.
Many of the services that identity theft insurers provide — such as credit monitoring — can also be obtained for free from various websites that alert you to new account openings or other suspicious activities. Or you can simply check your credit report yourself for free on a regular basis to make sure you don’t fall victim to identity theft.
Be sure to research identity theft insurance before you buy it
Although identity theft insurance likely isn’t worth it, you may decide you want the peace of mind that a policy can provide.
If that’s the case, be sure to research the costs and benefits carefully and to confirm the extent of the coverage your insurance offers. You don’t want a policy that doesn’t actually give you the help you need, so always read the fine print to make an informed choice as a consumer.
You can also take other steps to protect yourself from fraud without incurring the costs of an unnecessary identity theft policy, so consider opting for this approach instead. Safeguarding your personal information, freezing your credit, and signing up for free credit monitoring could be a far better way to keep your identity safe without wasting hundreds of dollars per year on insurance coverage.
View more information: https://www.fool.com/the-ascent/credit-cards/articles/what-is-identity-theft-insurance-and-should-you-get-it/