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What Is Identity Theft Insurance And Do I Need It?

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In this day and age, our whole life is managed and stored somewhere electronically. While it provides a great deal of convenience, it also gives cybercriminals more opportunities to steal personal information.

Did you know that identity theft affected over 30% of all consumers in the US in 2017? Just imagine, over $16.8 billion stolen from people just like you. Could identity theft insurance help you avoid becoming the next statistic?

What can you do?

Of course, there is no way to guarantee that you will never be a victim of cybercrime; however, there are ways to minimize the chance. Some general safety practices include never sharing your personal information, not clicking on any suspicious links or emails asking for personal data, creating strong passwords, and using a password manager.

For heavy mobile users, recommendations include turning off Bluetooth when not in use and always locking your phone.

Another suggestion is to avoid public wi-fi, which is not secure, whenever possible.

What identity theft insurance does

Identity theft insurance is a tool to help you mitigate the fallout if your identity has been stolen. It will not reimburse you for the money that you lost. It will, however, help you pay for the costs to repair your credit report and reclaim your identity.

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A growing risk

According to Javelin Strategy & Research 2018 identity theft report, over 30% of US consumers were victims of identity theft in 2017. This number represents over 16.7 million victims in the US alone; cybercriminals are not showing any signs of slowing down, so it is up to us to protect our data, reduce our exposure, and set up systems to reduce the impact of the crime on our life. 

The solution in idenity theft insurance

One of the ways to protect yourself is Identity Theft Insurance. The policy will not reimburse you for the money already stolen; however, it will assist in recovering and reclaiming your identity. The exact coverage will depend on each policy. The policy may cover: 

  • Some legal expenses needed to recover your identity
  • Lost wages
  • Credit report fees
  • Cost of credit monitoring services
  • Long-distance phone calls

The identity theft insurance policy will be subject to exclusions, a limit (typically $10,000 – $25,000), and a deductible that you need to pay before coverage kicks in. It will also give you access to a specialist that can advise you on the best plan of action and help you make sense of the ensuing chaos. 

The average out of pocket cost to deal with the aftermath of identity theft is almost $3,000 and a whole lot of stress. 

Yes, you’ll have to read that fine print…

As with any insurance policies, it is crucial to read the fine print and check precisely what is covered. Identity Theft insurance policies are inexpensive and run about $50-$100 a year. They can be purchased either as a stand-alone policy or an add-on endorsement to your current Homeowner’s insurance policy. The price usually stays the same whether it is a standalone policy or an endorsement. Adding the coverage as an endorsement may make managing the policy easier.

What are other ways to protect from identity theft?

Just as cybercriminals become more sophisticated, so must our strategies to protect our personal information. Since everything is done electronically, if someone knows your SSN, password, date of birth, or address, they can do a lot of damage. Opening new accounts and taking out loans, just to name a few. So what can you do? Consider the below recommendations: 

  • Turn off Bluetooth on your phone when not in use.
  • Opt-out of the prescreened credit card offers: While many identity thieves steal your information online, some are not above the good old going-through-your-trash tactic. The prescreened offers are a treasure trove of opportunity for the wrong person, so it’s best to opt out altogether at OptOutPrescreen
  • Monitor your credit accounts with all three reporting agencies: Experian, Equifax, TransUnion. Check them frequently. 
  • If you have children, monitor their credit report: It may sound surprising, but hackers love stealing the identity of kids as it offers a “clean slate” with no previous history. Experts recommend monitoring your child’s credit report the same as you do your own. 
  • Shred, shred, shred: Always shred any documents that contain personal information. Pulling trash out of your garbage bin may seem like an outdated tactic yet it is just as effective. 
  • Set up 2 step authentication whenever possible.
  • Choose strong, random passwords: When choosing passwords, create a random string consisting of lower and upper case letters, numbers, and special characters. Use a password manager tool like Last Pass or Password Keeper to store the passwords securely. 

Identity Theft Protection service is NOT an insurance policy. This service is a credit monitoring service that will alert you should anything go wrong. An identity theft insurance policy typically does not provide alerting services.

Actionable Steps


1

Check your current coverage for identity theft insurance

If you own a home, double check if your policy includes Identity Theft coverage or if you can add it.

2

Review standalone options

Most major insurance companies such as Liberty Mutual, Farmers, and others offer identity theft insurance policies.

3

Sign up for credit monitoring services

Consider signing up for a credit monitoring service (if not included in your policy).

4

Know what to do if your identity is stolen

Have an idea of what to do if you are the victim of a stolen identity crime. The steps include setting up a security freeze with all three credit reporting agencies (Experian, Equifax, TransUnion) and filing a fraud alert.

Still need help? Ask the coaches!

About the Author


Olga Fawcett

Olga Fawcett

Insurance Broker

As a former insurance broker for over 10 years, Olga has deep knowledge of insurance concepts and policies. She is passionate about helping others understand the insurance policies they are purchasing and find policies that suit their unique needs.
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