Ask the Expert: What is
identity theft insurance?
Identity theft insurance is a valuable safeguard against the high costs
of restoring your identity once you've been victimized by identity theft. Like
other insurance policies, identity theft insurance isn't designed to protect
you from identity theft itself. Instead, it helps you pay for the actions you
need to take when identity theft hits home.
Many identity theft insurance policies offer 100% coverage for out-of-pocket
expenses, up to a certain maximum, typically with a small deductible for each
identity theft incident. Out-of-pocket expenses covered by an identity theft
insurance policy can include:
Lost wages as a result of time taken off from work to deal with the fraud;
Notary and certified mailing costs for completing and delivering fraud
Re-application fees for loans that were declined because of erroneous credit
information caused by the identity fraud;
Phone charges for calling merchants, financial institutions, and law
enforcement agencies to discuss your identity fraud case;
Attorney fees incurred for handling legal action due to identity fraud,
Defending suits brought incorrectly by merchants and their collection
Removing criminal or civil charges wrongly entered against you; and
Challenging information in a credit report.
Remember, though, that an identity theft insurance policy is quite different
from an identity restoration service. Identity restoration services can guide
you step-by-step through the process of restoring your name; usually, these
services will also handle a lot of the paperwork and legwork for you. Identity
theft insurance, however, covers only the out-of-pocket costs you incur while
you (and/or your attorney) handle the actual work of restoring your identity.
As noted earlier, an identity theft insurance policy won't protect you against
identity theft. If you become a victim of identity theft, though, you can work
to reclaim your identity without digging deeper into your financial assets if
you're covered by identity theft insurance.