October 14th, 2013
**Today’s guest post is contributed by Carrie and Samantha.**
Fires, high winds, and other natural disasters can devastate your home and your finances – that’s why you have home insurance. Standard policies protect you from those and other perils. But another disaster also can affect your financial well-being and, ultimately, your home. Identity theft doesn’t ride in on a storm or spring to life like a fire. It strikes silently – you’ll suffer most of the damage from it before you know it. Unless, of course, you’ve taken precautions such as purchasing identity theft insurance.
How prevalent is identity theft? Javelin Strategy & Research reported 12.6 million instances of identity fraud last year, with about $21 billion being stolen. When criminals get your personal information, they can strike quickly, running up big bills, ruining your credit score, and making it hard for you to get credit, obtain loans, or even find employment.
Recovery from identity theft often is a long and frustrating process – reversing the damage can take years. Many insurance carriers offer identity theft insurance – either as an endorsement to your home or renters insurance policy or as a stand-alone policy – to help make the road to recovery a bit smoother.
What’s covered- and not- with identity theft insurance?
A common misconception when it comes to identity theft insurance is that it reimburses you for the money that was stolen. In reality, direct monetary losses are not covered with identity theft insurance. That means, if the criminal who stole your identity blew $5,000 at Nordstrom and then bought a Maserati, identity theft insurance will not reimburse you for those losses – although in many cases banks and credit card companies do limit how much you can lose.
Instead, it helps pay your expenses for regaining your identity. Some of these expenses may include:
- Reimbursement for medical ID fraud expenses
- Travel expenses
- New identification cards
- Tax ID fraud-related costs
- Lost wages
- Attorney’s fees
Some policies also include guidance and resolution services from a consumer fraud specialist who will help you through the process of restoring your identity.
What are the coverage limits?
While identity theft insurance coverage can vary from policy to policy, most policies offer $15,000-$25,000 worth of coverage for a particular claim. A standard identity theft insurance policy typically does not carry a deductible, meaning you won’t have to pay anything out-of-pocket before your policy starts to pay.
Premiums obviously vary with the amount (and type) of coverage you purchase. Some homeowners who purchase a premium homeowners insurance policy will have this coverage included at no extra cost. For others, most insurers will offer this coverage for as little as $25-$50/year. At $4/month, most consumers consider this a no-brainer financial product.
Questions to ask when purchasing identity theft coverage
As with any financial protection product, it’s important to understand your policy. Here are a few key questions to ask your insurance agent when comparing various identity theft insurance policies:
- What is the monthly/annual premium and can this be bundled into my homeowners or renters policy?
- What are the limits for coverage under this policy?
- Is there a deductible?
- Does the policy include support from a credit repair specialist?
- How quickly are claims typically processed?
The big key is understanding that identity theft is real; about 11.6 million fall victim annually, according to the U.S. Department of Justice. Take measures to protect your information from being taken and protect your finances – and reputation – from being damaged.
This article was contributed by Samantha Alexander and Carrie Van Brunt-Wiley, contributors to the HomeInsurance.com Blog. The HomeInsurance.com blog serves as a resource center for insurance consumers and homebuyers across the country.
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