Identity theft occurs when an individual steals your personal and financial information to assume your identity and make purchases or transactions in your name. No one is completely safe from it, and unfortunately, it is a rising white collar crime in America, with almost 14 million cases reported every year.

If your identity is stolen, your assets could be completely drained and your reputation tarnished. The damage can be extensive and very costly and repairing your identity can be a long, arduous, and expensive process. To mitigate these risks, you can purchase identity theft insurance, but is it a worthwhile investment?

What Does Identity Theft Insurance Cover?

Identity theft insurance differs from other insurance policies, as it does not cover the losses that resulting from the insured event the way other policies, such as auto or homeowners' insurance, would. For one thing, it won't reimburse you for any lost assets. Instead, it functions more like expense reimbursement, covering specified expenses you incur to restore your identity, such as credit reports, lost wages, phone fees, legal fees, and notary and certified mailing expenses. Coverage usually ranges from $10,000 to $1,000,000.

Many policies also offer personal support and help to fix the damage to your credit history and financial records. Some might also provide such services as credit alerts and monitoring of your credit and financial accounts.

Pros and Cons of Identity Theft Insurance

As you face the stress and frustration of dealing with the aftermath of having your identity stolen, the expert guidance offered by the insurance company to help you recover your identity may prove significantly useful. They may put you in contact with fraud specialists so you can restore your financial history back to its original condition much more quickly and efficiently. Moreover, because the policy reimburses you for qualified expenses, it eases the financial burden of re-establishing your reputation. Finally, any monitoring services included in the policy can help you find out earlier if someone might be stealing your identity, thereby mitigating your losses and the extent of damage to your name. Nevertheless, this is not exclusive to identity theft insurance, and buying it doesn't offer you any extra protection from identity theft, nor does it make it less likely you will be a victim.

Furthermore, although it does cover certain necessary expenses, many have a deductible ranging from $100 to $500.

As mentioned above, identity theft insurance won't refund you for any lost money or assets so. despite paying a premium, it cannot buffer your losses.

Is Identity Theft Insurance Worth the Price?

The answer ultimately depends on your financial situation and your preferences. Protecting your identity without paying for any services would mean constant vigilance on your part, and whether you care to invest the time to do so depends on you.

Rather than opting for full-blown identity theft insurance or doing all the legwork yourself, you could purchase a less costly credit monitoring service and make sure you regularly review your account and consistently address any red flags in your financial records. Taking these steps can ensure you catch any identity theft attempts before they go too far and may render identity theft insurance unnecessary.

There are also other identity protection methods to consider, such as having your credit card billing statements mailed to a post office box in a different zip code from your principal residence. As this number is often required for large purchases, having one different from your home address adds a level of protection to keeping others from using your credit cards.


Because it doesn't cover any of your losses, identity theft insurance can seem like a rip-off. However, the other services and coverage it offers can make it a worthwhile option. Whether it's right for you though depends on your particular situation and preferences.

If you do decide to purchase a policy, make sure to read the fine print so you understand the exact services offered, since some companies may limit the amount to support they offer, require a deductible, or exclude certain expenses.