What Is Identity Theft Insurance, And How Does It Protect You?


Photo from Alan Cleaver

Around the holidays, hackers made mincemeat of Target’s stock prices when they skimmed credit card numbers — more than 60 million — at the point of sale (POS) terminal, a rather brazen and terrifying move that taught the world just how far identity thieves had advanced in their abilities to create mischief for big companies and the consumers they serve.

As a result, most companies today employ some form of cyber insurance to guard against the fallout of the inevitable hacker. But what of the individual? Are they doing anything to protect themselves, policy-wise? And if not, should they be?

The FTC (Federal Trade Commission) notes that as many as nine million US citizens are the targets of identity theft each year. Most have to spend their own money and a considerable amount of time and energy to clean up their credit scores and sort out all their financial records. It is an enormous expenditure of time that leads to added costs and frustration.

To understand whether identity theft insurance is right for you, it’s important to know what kinds of products are out there on the market — costs and protections. We recently turned to State Farm for some assistance on understanding how such a policy works. Here are some of the highlights:

According to State Farm, the cost of a standard identity theft insurance policy is $25 per month, and it can be added as an optional endorsement under a homeowners, renters, condominium unitowners, manufactured home, or farm and ranch policy. “If you become a victim of identity fraud, you’ll have expense reimbursement and personal help for the recovery process,” the company stated.


What Is Identity Restoration Case Management?

One of the typical protections found on an identity theft insurance policy is that of identity restoration case management. What this means is that for up to 12 months after the ID has been compromised, a case manager will work with affected agencies and institutions, including credit card companies, credit bureaus, creditors, and businesses, on behalf of the customer to correct any covered identity fraud issues that may be experienced.

This can be especially appealing if you have no idea where to begin, and you’re trying to balance crisis management with the day-to-day responsibilities of life.


How Expense Reimbursement Works

While this may be different depending on who you’re provider is, State Farm’s identity theft insurance coverage provides up to $25,000 for covered expenses caused by identity fraud, and that includes the following:

  • Cost of obtaining credit bureau reports
  • Fees when reapplying for loans, grants, or other credit instruments
  • Phone, postage, and shipping fees
  • Notary and filing fees for costs you incur to correct your identity and credit records
  • Certain legal fees resulting from identity fraud
  • Up to $1,000 for deductibles or service fees from financial institutions and other costs to recover control over your personal identity (This is part of, not in addition to, the expense reimbursement limit.)
  • Up to $5,000 combined for lost wages and child and elder care expenses (This is part of, not in addition to, the expense reimbursement limit.)


In Summary

It can be unsettling, infuriating, and even terrifying, to have your identity robbed by one of these savvy 21st Century crooks. Life is hard enough paying bills, saving for retirement, raising your children, and finding a little free time to enjoy yourself every now and then. You don’t want the added headache of going it alone should your identity be compromised. While credit cards often have built-in protections, not every facet of your life will necessarily be covered. To guard against the unexpected attack, $25 per month is a pretty cheap price to pay. Have you tried identity theft insurance? How has it worked out for you? Share your experience in our comments section.

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