Identity Theft Insurance: Do You Need It?
More than 17 million Americans were affected by identify theft in 2014. That’s roughly four times the number of home burglaries that occur each year.
While most of us understand the risks and security solutions available for our homes, many people still don’t know the facts surrounding identity crime—or how to hedge against incidents of fraud or theft. As a result, we may be exposing ourselves and our families to serious financial damage…
Who’s most at risk for identity theft?
Identity theft can happen to anyone, but there are a few demographics that tend to attract cyber criminals:
According to Bureau of Justice Statistics, households with a combined annual income of $70,000+ are targeted more frequently than those earning less. Senior citizens are also at greater risk, as the number of senior victims grew from 2.1 million in 2012, to 2.6 million in 2014.
Young people (or anyone who is inclined to shop and bank using mobile devices and public Wi-Fi) are prime targets. Teens and twenty-somethings who are active on social media heighten their risk by posting too much personal information to their account profiles.
Finally, online taxpayers and tax preparers are experiencing increased exposure. Last year the IRS identified 163,087 fraudulent tax returns, totaling more than $900 million in refunds filed using stolen social security numbers.
What are the costs involved in a stolen identity incident?
Not all incidents of identity theft are major, life-changing events. In many cases, fraudulent charges made on newly opened or existing accounts total less than $1,200. But the actual amounts spent/stolen from your accounts are not the only potential losses. Other costs can include:
- Delayed tax returns and refunds
- Financial counseling services
- Legal fees and paperwork
- Time lost from work or school, correcting your accounts and credit report
- Subsequent credit monitoring services
- Damaged credit—indirect costs could include higher interest rates on new credit cards, car loans or mortgages, even failure to land a new job…
Do you need identify theft insurance?
For most families this is a question that deserves personalized attention and advice. If you already have a Massachusetts homeowner’s insurance policy, condo insurance, or a renter’s insurance policy, it makes sense to ask your insurance agent what the policy will cover in the event of identity fraud.
Based on your needs and concerns, identity theft coverage can be added to your policy as an endorsement, for a flat fee of around $25 to $35 per year. It’s also possible to purchase stand-alone identity theft insurance (if you don’t have a home insurance policy).
Which costs will identity theft insurance cover?
The bad news is identity theft insurance is not designed to help you recoup monetary losses incurred. If someone in Sheboygan goes on a shopping spree with your credit card, you won’t receive a blank check to cover that loss. It’s on you to sort through the charges with your bank or creditor.
The good news is that identity theft coverage provides funds to support your cleanup effort. Safety Insurance’s Identity Fraud Expense Coverage, for example, provides up to $15,000 in the wake of a stolen identity. That protection can go toward financial counseling (a dedicated expert who will walk you through the process of resolving false charges/repairing your credit), attorney fees, lost wages, and credit monitoring (to prevent future theft).
Another key benefit? Identify theft insurance will typically cover everyone in your household. So families with new credit card users and college students can rest assured their children’s financial security is protected, too.
How can you learn more about identity theft insurance?
The quickest way to get answers that address your specific needs is to contact a local insurance agent. Meanwhile, there are simple steps you can begin to take right now to prevent identity theft:
- Monitor your credit regularly. You’re entitled to a free annual report from each of the three major credit bureaus: TransUnion, Experian, and Equifax.
- Create smarter passwords (and use a tool like LastPass.com to remember them).
- Shop carefully—especially online (look for website URLs containing “https,” a more secure version of http, which ensures authorization and secured transactions).
- Protect your computer from malware and viruses.
- Avoid emails and instant messages from unknown senders.
- Invest in a shredder. Shred bank/credit statements and other documents containing sensitive information.
- Proactively place a fraud alert on your credit report. With this alert in place, creditors are required to contact you before opening any new accounts or making changes to accounts that are under your name.