Is Identity Theft Insurance Worth the Cost?
By Diane Tait
|Image courtesy Pixabay|
Face it, when it comes to identity theft, the bad guys are winning. In 2018, consumers in the US were fleeced out of close to $17 billion by identity thieves. Even worse is the fact that the majority of these thefts has shifted from credit card counterfeiting to checking and savings account takeovers. Another favorite target of identity thieves is to open fraudulent credit card accounts and/or to take out loans in the names of their victims. Once a victim has been fleeced, the onus is on them to prove that the losses that occurred are indeed fraudulent. This too costs time and money, which in essence adds insult to injury. While all this is going on, the thieves are free to use and sell your financial data online. Since many of the thieves are located offshore, the odds of the perpetrators being caught, much less prosecuted, is slim at best. Even children’s identities have been stolen and used to commit fraud that their parents are then forced to sort out at their expense. Since it can take months or even years for victims of identity theft to fully recover from the effects of identity theft, many consumers are looking for a way to reduce the impact of such an occurrence. That’s why the insurance industry has added identity theft insurance to their lineup.
What is identity theft insurance and how does it work?
While an identity theft policy won’t stop thieves from stealing your good name, it can help you recover if you’re ever victimized by one. Depending on the coverage, this kind of policy can reimburse you for some of the expenses that are incurred in the process of trying to repair your credit. Everything from credit monitoring and recovery services to legal fees and lost wages are included in some ID theft policies. While these policies won’t reimburse you for the financial losses you incur, they will help to reimburse you for much of what you’ll spend after your identity is stolen.
Many policies also help you straighten out the aftermath of ID theft, including cancelling unauthorized credit cards and loans. While some insurers only provide advice, others assign a case manager who’s authorized to make calls on your behalf. Unless you have a lot of time on your hands to call multiple credit card issuers, lenders and other companies that you deal with regularly, having a dedicated case manager can be a boon.
What’s the worst that can happen if your identity is stolen?
|Image courtesy Pixabay|
Once your identity is in the hands of thieves, their actions can have far reaching repercussions. It’s not uncommon for identity thieves to file a fraudulent tax return in a victim’s name with the IRS. Armed with your identity, they can drive a car off the dealer’s lot and stick you with the bill. He or she can take an all-expense-paid vacation. The thieves can even use it to check themselves into the hospital for expensive elective surgery or to have your medications sent to their address. Once the fraudulent bills start piling up, you can expect your credit rating to take a hit. This can affect everything from your ability to take out a loan to the amount you pay for insurance and other services.
If your child’s identity is stolen, you could quickly come to find that benefits currently being paid to you for your child’s benefit are curtailed. You could also start receiving bills in your child’s names for items you never ordered. Even worse, if an identity thief obtains your child’s social security number, you could even receive a letter from the IRS demanding back taxes. ID theft has been known to affect your ability to get your child enrolled in school.
Here are some sobering statistics regarding identity theft:
1. There were nearly 1.4 million reported cases of ID theft in the US in 2020.
2. According to the Federal Trade Commission, identity theft accounted for 23.9% of all fraud cases in the US in 2020.
3. The FTC also reported a 73% increase in identity theft from 2019 to 2020.
Millennials are the most likely to be
victims of ID theft, with Gen-Xers being second.
5. There were 23,651 incidents of ID theft in 2020 for children aged 19 and below.
How can you obtain identity theft insurance?
There are two ways to obtain ID theft insurance: Either add it to your existing homeowner’s policy or purchase a stand-alone policy. Believe it or not, you may already have this coverage without knowing it. That’s because some insurers include it in their homeowner’s policies. Call your agent to find out if this coverage is included or what it would cost to add it as a rider to your existing policy. Also ask about the benefits and limits of the coverage being offered. Here are some of the benefits you should ask about:
1. Is there a deductible?
Is a case manager provided to help you
straighten out your credit?
3. Are attorney fees reimbursed?
4 . What kind of assistance is provided in terms of court costs and criminal cases?
What are the limits on reimbursement of
administrative fees and expenses?
6. Are lost wages covered?
7. Are notary fees, postage, and credit report fees covered?
While you should shop around to find the policy that
best fits your needs, since the cost is only around $25 - $60 per year for this
kind of coverage, it’s well worth considering. Because not having it could cost you dearly someday soon.
Diane Tait owns and operates A&B Insurance. To find out more about how you can save money on insurance, go to her site or fill out the form at right.