Security experts say that anyone with an identity will have it stolen one day, adding identity theft to life’s sure things along with death and taxes. If insurance can take some of the financial stress and uncertainty away, that is a good thing.
Identity theft affects approximately 15 million people a year in the United States. It ranges from fraudulent credit card transactions to using a stolen ID when committing a crime. Fraudulent credit card charges to an existing account are typically taken care of by the credit card company. The most a victim of credit card theft can be charged for unauthorized purchases on an existing credit card is $50. The limit for debit cards is $500 and the limit for gift cards is the value of the card. If the thief opens a new account using your stolen identity, the victim’s costs may be higher (on average $1,200). Often these cases go undetected for an extended period of time; until the victim’s declining credit score causes an issue with applying for a loan or a credit card. According to the FTC, individual victims spend an average of 60 hours restoring their identity. 29% of victims of identity theft who spent longer than 6 months resolving financial and credit problems reported experiencing severe emotional distress.
Typically, insurance for identity theft is offered as an endorsement to your homeowners insurance policy. The endorsements can cost from $15 to $25 per year. A typical policy covers the out-of-pocket costs victims incur to restore their credit history and identity records following their identity has been stolen. These costs can include:
- Various legal fees including costs for both civil and criminal defense
- Lost wages as a result of time away from work
- Child or elder care costs as a result of time away from home
- Credit repository report costs
- Postage, phone and shipping fees
- Mental health counseling costs
Some insurance carriers will also offer services to help victims through the processes of repairing their credit. This assistance includes:
- Working with national credit repositories, creditors, financial institutions, and other service providers to identify errors and correct the victim’s record.
- Writing letters on the victim’s behalf to credit bureaus and others
- Reviewing credit and requesting a fraud alert with credit bureaus if necessary
- Preparing communications to the Social Security Administration, the Registry of Motor Vehicles and other government entities
- Working with the victim to check for a recurrence of the identity theft problems.
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