Identity Theft Insurance: What Does It Really Get You?

If you read the headlines, you probably know that identity theft reached an all-time high in 2016, and perhaps you’ve considered getting some kind of identity protection coverage. You’ve probably also seen those ads boasting that one company is so confident they can protect your identity that they will insure it for up to $1 million. Sounds great, doesn’t it? Well, here’s the straight scoop on identity protection and identity insurance.

First of all, no one can prevent identity theft. With more than 4 billion records of personal information breached in 2016, and a thriving black market for this data on the Dark Web, criminals are going to get and exploit stolen identities. In recent articles, we’ve talked about identity monitoring, which alerts you to suspicious activity and we’ve talked about the importance of identity recovery services. So where does the million dollars of insurance come in?

Identity theft insurance is the most misunderstood aspect of identity protection, largely because of advertising. Some ads make it sound like the provider will insure you for up to a million dollars of financial losses to identity thieves when in fact the $1M coverage is actually a “service guarantee”. This “$1M service guarantee” covers the cost of hiring experts to help provide recovery services. That sounds important, right? Yes, as we’ve said before, recovery services are critical if you’ve become a victim of identity theft, but this is what you’re already paying a monthly or annual fee to receive.

The truth is that most identity protection plans include $1M of coverage for reimbursement of your out-of-pocket recovery expenses: costs such as postage, copying, and notary fees, which typically amount to a few hundred dollars or less. Some plans also cover items such as stolen funds, lost wages or legal and court fees, so if you had a lot of notary fees or postage or you had to travel to a local IRS office to verify a tax return, you could file a claim for mileage and having to miss work. Unfortunately, insurance comes down to the details, so be sure to review the details (and fine print) carefully to ensure you’re getting the coverage you expect.

When you’re shopping for an identity protection plan, the quality of the recovery services is the most important thing to consider. If the provider has an expert team of recovery advocates and is committed to restoring your identity completely, you shouldn’t have any significant losses or any need to file an insurance claim and wait for payment. So, when you see those identity insurance ads, just consider the message. If the best thing a provider can offer you is a million dollars of protection against what they know will be a few hundred dollars of expenses, keep looking. If a provider can show you a history of 100% identity recovery and satisfied customers, they’re worth considering.