Evaluating Your Need for ID Theft Insurance
With the dramatic increase in identity theft, there has been a correlating surge in the popularity of ID theft insurance. Advertisements for this type of insurance are everywhere - billboards, radio, magazines, TV and online - but how do you know if you actually need identity insurance?
For some, the price of ID theft insurance is well worth the peace of mind it provides, particularly as the incident rate of identity theft continues to rise. However, it is important to know what ID theft insurance does and does not cover. It typically does not prevent you from becoming a victim of ID theft, nor does it protect you from financial loss. It does not fix your credit rating or expunge a criminal record, traffic tickets, or owed taxes that someone has acquired in your name.
Unlike auto insurance that will take care of the repair your car, Identity theft insurance typically only covers are the costs associated with you cleaning up your identity records.
For the $25 -$150 a year subscription, ID theft insurance usually reimburses victims expenses for between $15,000-$25,000 to help reestablish your financial identity - including the cost of copying documents, making phone calls, lost wages for time off work needed to fix your identity, notary services, certified mail, and attorneys fees should they be necessary.
It is worth bearing in mind that expenses associated with restoring your ID can quickly add up particularly if your income is wage, rather than salary, based. The time it will take to restore your identity can vary significantly, anything from a few hours to several hundred hours, and for many the lost wages is a real burden – even though coverage maximums for lost income is often only $2,000. Most of the clean up after ID theft is something victims have to do for themselves. Few need an attorney, but should you be one of the 16% who do need legal services, having these fees covered by insurance can also be a great benefit.
Before you make a decision as to whether ID theft insurance is right for you, consider the following questions:
1) Check your homeowner insurance policy – it may already include ID theft coverage, or you may be able to add it to your policy for a nominal fee
2) Review the policy’s coverage limits. Most top out between $15-$25k, but there are likely to be reimbursement limits by category – like for lost wages, and legal fees, and some expenses may require pre-approval by the insurer.
3) Does the policy have a deductible? You may be required to cover the first $100-$500 yourself
If you do choose to purchase ID theft insurance, do not ease your vigilance. You still need to proactively avoid becoming a victim of ID theft by protecting sensitive information, and by frequently monitoring your financial accounts, medical records, and other sensitive information.
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