Does Home Insurance Cover Identity Theft?
Last year, almost 49 million Americans fell victim to identity theft, a crime where thieves use another person's identifiable information for financial gain. According to a 2021 Identity Theft Study conducted by Javelin Strategy and Research, the crime cost Americans almost $56 billion.
Some victims of identity theft wonder if they can turn to their homeowners or renters insurance coverage to get reimbursed for these losses. In this article, we'll discuss what your homeowners insurance policy covers if you become a victim of identity theft. You'll also learn several ways to protect yourself from cybercrime and identity fraud.
What Is Identity Theft?
Identity theft is when a thief steals your personal information and uses it without your permission to open financial accounts like a bank account. They may also receive medical services under your accounts.
Information that's identity thieves commonly steal includes:
- Home address
- Credit card number
- Bank Account
- Social Security Card
- Email Address
- Medical Insurance Information
Identity theft can severely affect your personal life, credit rating and business. For instance, some companies that suffer data breaches have to pay to alert customers and pay for credit monitoring. After the loss of trust, some customers won't return to the business. It may take years for an identity theft victim to recover from the damage these incidents cause. Some people and companies never fully recover.
Identity theft generated the highest number of fraud reports in 2020. According to the Federal Trade Commission's Consumer Sentinel Network Data Book, it received 2.1 million fraud reports from consumers in 2020, with imposter scams topping the list.
According to the FTC, there were 1.4 million were identity theft reports. Thirty-four percent of individuals who filed claims reported losing money. In 2019, three million Americans have their credit card numbers used for fraudulent purposes.
Almost 50 percent of information stolen by identity thieves is taken from stolen laptops, portable devices or memory sticks that store data. Another way that thieves get information is by stealing credit card numbers, passports, driver's licenses or social security numbers. They may also send phishing emails, use spyware or phone calls to gather this information.
Will My Homeowners Insurance Policy Protect Me if I'm an Identity Theft Victim?
Homeowners insurance protects against damages that your home may receive because of a named peril. This coverage, also known as a home insurance policy, covers damages from wind/hail, fire, lightning, civil unrest, theft and other situations.
Your homeowners insurance also provides financial protection when someone becomes injured due to a hazard on your property.
Although most homeowners policies cover physical theft (when someone breaks into your property and steals your belongings), they offer little protection for a victim of identity theft. A policy may reimburse a homeowner after a thief steals a wallet from a physical residence. They won't provide any coverage if someone breaks into your computer's hard drive and steals your identity.
Does Renters Insurance Cover Identity Theft?
Renter insurance may provide some assistance when identity theft occurs if you have add-on coverage. They are similar to homeowners policies, with the same coverages and payout limits.
What Is Identity Theft Coverage?
Fortunately, identity theft policies can help customers restore their credit after they fall victim to an identity thief.
Identity theft insurance, also known as identity theft protection is an add-on coverage that can help customers to restore their good credit. Homeowners insurance providers offer this protection as an add-on endorsement or rider to a homeowners insurance, renters insurance or other policy. These types of policies are also offered as standalone coverage.
These policies are very inexpensive for the protection they provide. Unless you have one of these riders, you may have to pay for any costs associated with identity theft out of your pocket.
What Coverage Does Identity Theft Protection Provide?
Most identity theft riders on standard homeowners insurance policies won't cover losses like unauthorized purchases or bank loans taken out in your name. What they do offer is access to a fraud specialist who can tell you what steps you'll need to take to restore your credit. This case manager will also speak with your creditors, federal agencies and other institutions to help repair your credit.
Identity theft coverage also provides the following services to individuals:
Payment of legal fees
Covering lost wages
Replacement and reissuing of government IDs
Identity and credit repair services
Recovery of fees from banks, credit bureaus and other financial institutions.
How Much Does Identity Theft Insurance Protection Cost?
Adding identity theft coverage to your homeowners insurance policy doesn't cost much money and can provide peace of mind if someone steals your identity.
Some home insurance companies offer this identity protection coverage as a rider. According to the National Association of Insurance Commissioners (NAIC), these endorsements may add $25 - $60 to your homeowners policy's premium. For instance, State Farm provides an Identity Restoration Insurance rider for $25 a year on your home, condo or mobile homeowners insurance policy.
Other companies offer identity theft protection as a stand alone service. You can purchase this protection as a monthly plan from some credit card issuers or credit bureau companies.
Premiums for this coverage range in price from $9.99 to $34.99 for individuals and adults. For instance, Experian (a credit bureau) and Discover (a credit card company) offer identity theft protection programs that cost $10 - $20 per month.
Limitation of Identity Theft Insurance Coverage
Identity theft coverage helps to lift some of the financial issues you may experience after someone steals your identity. This coverage doesn't prevent your identity from being stolen.
Identity theft insurance will help you cover some of the costs associated with identity theft, such as your legal fees and professional services to restore your identity. It won't repay you for the financial costs associated with theft.
According to Forbes Magazine, a person can be responsible for a fraudulent credit card charge of up to $50.
Which Companies Offer Identity Theft Coverage?
Several insurance companies offer identity theft coverage or a rider on a renters insurance or homeowners policy. Here are some identity theft coverage options:
Individuals who purchase home insurance policies can get optional identity theft protection, a Digital Footprint Service that collects information from your financial accounts and alerts you if someone tries to open a new one in your name. It also alerts users when a thief has breached your data. It also tracks information that appears on the dark web. Allstate will reimburse you up to $500,000 for money stolen from your bank accounts.
The nation's largest car insurance company also offers an Identity Restoration Insurance that costs $25 per year. It reimburses policyholders up to $25,000 after an identity theft incident.
This endorsement can be added to your State Farm home, renters, condominium, and manufactured home insurance. It covers yourself, your spouse, relatives and dependents (under 21 years old) who live in your household.
The company offers two types of restoration services that can help identity theft victims navigate through the recovery process. They provide Cyber Event Identity and Fraud Loss Coverage (CEIDR) which includes protection from:
- Fraud loss coverage
- Identity restoration
- Case management services
In North Carolina only, they offer Identity Restoration Coverage (IDR) for homeowners. It doesn't include cyber-attack coverage or fraud loss coverage. It does offer identity restoration case management services and fraud expense reimbursements. They also offer cyber insurance that has an annual payout limit of $15,000.
The Hartford offers Identity Fraud Expense Coverage as an optional endorsement under its AARP Homeowners Insurance Program. Homeowners can get up to $25,000 that reimburses you after someone uses your personal information without your permission.
USAA provides limited identity theft protection in its standard homeowners insurance. It only pays up to $5,000 for identity theft cases. Customers can get added protection from the company by buying a rider. USAA's coverage is limited to military members, veterans and their families. Identity theft coverage isn't available in all fifty states.
Will Identity Theft Insurance Reimburse Me if Someone Uses My Credit Card Fraudulently?
Only a few identity theft companies offer to restore your credit and get back your identity. Most will reimburse you for the stolen funds from your credit card.
Identity Theft Insurance through an Identity Theft Protection Service
Some companies offer identity theft protection as a service to their customers. Experian now offers Identity Theft and Credit Protection Service which provides credit monitoring, dark web surveillance and fraud resolution. Customers can get identity theft coverage up to $1 million.
How to Avoid Identity Theft
The Federal Trade Commission has offered these tips to avoid identity theft.
Monitor your credit reports for fraud – Under federal law, the three credit agencies are required to provide a free credit report when you request it every year. You can order copies of your credit report by visiting www.annualcreditreport.com to get your reports. The FTC recommends that you spread out your request so you can receive a free one every quarter.
Examine your credit card information and accounts statements from your bank – Track accounts from your credit card, bank, brokerage firm and retirement every month to find out if there is any fraudulent activity taking place.
Review Your Explanation of Benefits from your health insurer – Look at your insurance coverage's explanation of benefits to ensure there are no medical treatments listed that you've never received. If your insurance's EOB lists visits to doctors or procedures you've never had, report it to the health insurance company and medical facility.
Get a credit freeze – A security freeze blocks people from accessing your credit reports without your permission. It prevents potential creditors, such as credit card companies, from checking your reports and also stops thieves from opening accounts in your name.
The FTC now offers a free recovery plan for victims of identity theft. It doesn't include services like credit monitoring, nor does it pay for legal fees.
Do you need affordable identity theft insurance or fraud coverage for yourself or a family member? You can use SmartFinancial's online insurance comparison engine to find homeowners insurance companies that offer riders on their policy.
Just enter your zip code and we'll provide you with free quotes from local insurance companies within your area. We'll also connect you with local insurance agents who can answer your questions about identity theft insurance protection.