Identity theft insurance is a type of insurance coverage designed to help individuals recover from the financial losses and expenses incurred because of identity fraud. While it doesn’t prevent identity theft, it can assist in dealing with the aftermath.
Identity Theft and How It Occurs
Identity theft is a type of fraud in which personal information is stolen and used by someone else for financial gain or other malicious purposes. Stolen information may include your name, social security number, credit card details, date of birth, and other sensitive data. Identity theft can have serious consequence, including financial loss, damaged credit scores, and even legal issues if the thief engages in criminal activities under the stolen identity.
Common methods used by identity thieves to collect information include:
Phishing: Used by thieves to obtain sensitive personal information, such as usernames, passwords, and credit card details. Typically, it involves using fraudulent emails, messages, or websites that mimic legitimate entities to trick individuals into providing their information.
Social Engineering: Identity thieves and cybercriminals use social engineering to manipulate individuals into divulging confidential information or performing actions that compromise security. IBM, an industry leader in technology, states, “because social engineering uses psychological manipulation and exploits human error or weakness rather than technical or digital system vulnerabilities, it is sometimes called ‘human hacking’”(1).
Data Breaches: This occurs when unauthorized individuals or entities gain access to sensitive and confidential data, often compromising personal information. Stolen information can include personal data such as names, addresses, social security numbers, credit card details, and passwords.
Skimming: This is a method used to collect data from the magnetic stripe of credit and debit cards. Criminals install small skimmers to secretly and quickly record the information stored on the card’s magnetic stripe when swiped at a legitimate point-of-sale (POS) terminal or an ATM. The stolen card information can then be used to make unauthorized purchases or create counterfeit cards.
Stolen Wallets or Documents: Stolen wallets or documents can directly and immediately threaten your personal information and potentially lead to identity theft. When someone obtains unauthorized access to your wallet or important documents, they gain access to a wealth of sensitive information, such as your driver’s license or passport, credit cards, social security cards, and more.
Why Identity Theft Coverage is Worth Having
Identity theft can happen to anyone, regardless of age or financial status. In fact, identity fraud has become a prevalent issue in recent years, making identity theft coverage a worthwhile investment. According to the National Council of Identity Theft Protection, “of the total 5.7 million cases reported to the FTC, 1.4 million (25%) were specific to identity theft”(2). Having protection in place before the fraud occurs is critical to cushioning the blow to your bank account.
How Identity Theft Insurance Works
If you’re considering purchasing identity theft insurance, it’s important to know your options. You can purchase coverage as a stand-alone or add it to your existing coverage – such as homeowner’s or renter’s insurance. Be sure to research insurance companies beforehand to determine if their policy limits and exclusions are a good fit for you and your budget.
Coverage costs can range anywhere from $20 to $60 annually. It’s important to note that this is a broad range, and specific premiums may depend on the insurance company, the coverage offered, and your personal circumstances.
What Identity Theft Insurance Covers
The type of coverage you choose, along with the insurance carrier, will determine what is covered in the event your identity is stolen. Coverage limits can range from $10,000 or more, depending on your insurance provider. Generally, identity theft insurance covers the costs needed to recover your identity. This could include lost wages and administrative or legal fees needed to restore your identity.
Identity Theft Coverage Exclusions
As mentioned above, identity theft insurance typically only covers costs related to identity recovery. This means that fraudulent charges or purchases made will not be covered. As always, check with your insurance provider to determine what is and is not covered by your policy.
Preventing Identity Theft
While not a guarantee, there are a number of ways in which you can prevent identity theft from happening to you. Be wary of unknown calls and texts, and do not give away your personal information. Government agencies will never call or text you; if a caller claims to be with a government agency, this is a scam.
Take care when clicking on links. If you receive a text or email containing a link, be sure to check the sender’s credibility. Typos, unfamiliar domains, and unknown senders are just a few ways to spot phishing.
How to Spot Fraud
The US government has highlighted a few warning signs of identity theft. Such signs include:
- Bills for purchases you did not make
- Debt collection calls
- Unfamiliar accounts on your credit report
- Loan application denials
- Missing all or some mail(3)
Make sure to monitor your credit report regularly. By being aware of your credit, you’ll be able to identify suspicious activity promptly. Consider added precautions, such as fraud alerts that verify your identity upon submission of a credit application.
How to Report Identity Theft
If you’re a victim of identity theft, promptly report the fraud to the Federal Trade Commission by going to identitytheft.gov.
Get Protected Today
Interested in learning more? We can help you determine if this policy is right for you. Our team of professionals is at the ready to answer any questions you may have about identity theft insurance and all it entails. Give us a call today at (800) 981-4700.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.