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Understanding Identity Theft Insurance: Do You Really Need It?

Christopher Somerville - Top10 writer
A hacker committing identity theft through stealing credit card information.
Identity theft can happen through various means, such as data breaches, stolen mail, or deceptive online tactics. It poses a real threat to us all. If your Social Security number (SSN) falls into the wrong hands, it can be exploited for someone else's gain.

In 2022, consumers reported nearly $8.8 billion in losses due to fraud, a 30% increase from the previous year. This highlights the need for identity theft protection services to safeguard against cybercrime.

In this guide, I'll explain the importance of ID theft insurance in securing your finances and help you determine if it's a necessary investment for your peace of mind and financial well-being.

» Be proactive! Take these 10 proven steps to protect your personal information.

What Is ID Theft Insurance?

Identity theft insurance provides two key services: financial protection and information monitoring. It primarily guards against the monetary consequences of having your identity stolen and misused.

If your information gets used in a way that impacts you financially, the policy compensates you for any losses and helps minimize further damage.

How Common Is Identity Theft?

Around 33% of Americans have experienced identity theft. It occurs more frequently in the US than in many other countries, often involving hackers who exploit data from breaches for financial gain. Identity theft isn't an isolated incident; it can happen over time as your data gets matched and misused from various sources.

How to Get ID Theft Insurance

You can access ID theft insurance through various sources, often as part of credit monitoring services, like LifeLock or Identity Guard. These companies keep an eye on your data, alert you to any suspicious activities, and provide financial protection if your identity gets stolen.

When choosing an ID theft insurance provider, evaluate their reputation and the range of services they offer. The goal is to strike a balance between comprehensive protection and affordability.

» Hackers use these 10 methods to steal your identity.

Two women shocked that they are victims of identity theft.

What Does ID Theft Insurance Cover?

Credit Monitoring

ID theft insurance companies continuously check your credit report, alerting you to unusual changes or activities. This regular monitoring helps protect your credit score from unauthorized changes. If someone steals your identity, you can quickly secure your credit and minimize damage.

Fees Associated With ID Theft

When considering ID theft insurance, you first need to understand the various fees it covers. Here's a breakdown:

  • Notary fees: If you're a victim of identity theft, you may need to notarize documents to prove your identity or dispute fraudulent activities.
  • Bank fees: The insurance covers any bank-related charges resulting from the misuse of your identity, helping you restore your financial standing without additional costs.
  • Legal fees: Legal expenses can add up fast in identity theft cases. ID theft insurance covers these costs so you can find legal assistance without worrying about the financial impact.

Lost Wages

ID theft insurance companies compensate for lost wages if you need to take time off work. This ensures your income remains unaffected while you address the problems caused by identity theft.

A couple that are stressed about taking leave from work due to identity theft issues.

Childcare Costs

ID theft insurance covers extra childcare expenses if you need to deal with identity theft issues. This support maintains your family's routine, easing your burden as a parent while you focus on resolving the identity theft situation without neglecting your family's care needs.

Travel Expenses

If you need financial aid for any travel required to resolve identity theft issues, you can get coverage for transportation, lodging, and meals. This ensures you can make necessary trips to address the theft without incurring extra expenses.

Identity Restoration

Companies like Aura offer valuable assistance in identity restoration, making the service a suitable choice for managing the complexities of identity theft.

Aura's White Glove Fraud Resolution team, experienced in dealing with credit bureaus, assists in initiating credit freezes or locks and provides around-the-clock support to resolve fraud incidents​​.

They monitor for breaches of your identity, passwords, and accounts, including dark web detections, and alert you if someone uses your SSN to open a new bank account. Aura also backs every adult member with a $1,000,000 insurance policy to cover losses and fees.

Stolen documents of a victim of identity theft.

Document Replacement

If you're dealing with the headache of lost or compromised documents like passports or IDs, IDShield can help. Its team of identity theft resolution specialists handles and submits cases on your behalf, addressing both current and past disputes.

IDShield specialists issue fraud alerts with the Social Security Administration, the US Postal Service, and the three major consumer credit reporting agencies—Equifax, TransUnion, and Experian. This comprehensive approach ensures the restoration of your personal and financial integrity.

Fraudulent Loan Applications

Fraudulent loan applications happen when someone uses your identity to get loans without your knowledge or consent. myFICO's fraud alert feature warns creditors you may be at risk of identity theft, prompting them to verify your identity before giving credit. This helps prevent unauthorized loan applications.

Setting up a fraud alert with myFICO is simple. You select a credit bureau for your fraud alert application. Once you submit to one bureau, they notify the other two, ensuring comprehensive coverage. I'd also recommend you keep a record of the bureau's procedures for extending or removing the alert.

How Much Does ID Theft Insurance Cost?

ID theft insurance costs vary by company, ranging from $10/month to $350/year.

Aura's plans are priced between $15 to $40 monthly, with yearly options from $144 to $288. IDShield starts at $14.95/month for single credit bureau monitoring and $19.95 monthly for three-bureau monitoring. Meanwhile, Identity Guard's Value plan begins at $7.50/month when paid annually.

An identity theft insurance company helping a victim of identity theft.

Embrace Proactive Protection Against Identity Theft

By monitoring your credit score, watching your mail, and being wary of unknown accounts or services in your name, you can guard against identity theft. But since having an online presence always involves risks, investing in identity theft insurance is a smart move.

It provides financial security against the costs and losses of identity theft. It also covers expenses related to restoring your identity and credit. Additionally, it offers support during the recovery process, making it less stressful.

» Learn how to protect your data online.

Christopher Somerville - Top10 writer
Chris Somerville, Top10 writer with a BA in Technical Writing, shines as Oregon Employment Dept's Supervisor & ID Theft Manager. Skilled in staffing, admin, legal analysis, project management, and customer service, he boasts a vast skill set, including magazine production and automotive marketing.