How Does Identity Theft Insurance Work?
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Purpose
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Insurance companies offer identity theft insurance in order to protect their customers from the consequences of having their identities stolen. These consequences may include negative marks on one's credit history, a lower credit score and depleted funds. Though identity theft insurance can act as a safety net that protects its policy holders from incurring major legal costs that are associated with clearing up their credit score, most policies will not reimburse any money that the theft was able to drain from the policy holder's account. It will simply reimburse them for legal fees and other costs associated with clearing up identity theft, such as long-distance phone calls or fees for obtaining financial documents. Most policies are approximately $20 a month and can be purchased as a stand-alone policy or added to homeowner's policy.
Considerations
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According to the National Association of Insurance Commissioners, identity theft insurance cannot actually prevent a policy holder from becoming the victim of identity theft. It can simply help with the costs and hassles that result from it. Therefore, many experts such as MSNBC.com's financial expert Herb Weisbaum, advise that every consumer take a few precautionary steps to prevent identity theft in the first place. Weisbaum recommends that consumers store their personal information, including Social Security numbers, PINs, and credit card and banking account numbers, in a safe location. He also recommends that consumers shred any documents containing personal financial information, and that consumers check their credit scores and financial statements every month to ensure that the data reported is correct and applicable to themselves, not to a thief.
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Purchasing Insurance
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Many companies offer identity theft insurance. In fact, chances are that company that currently handles your homeowner's, emergency/disaster, health or car insurance policies may also offer identity theft insurance. Some of the largest and most well-known providers of identity theft insurance include Farmer's Group, Nationwide, Travelers Insurance, Chubb Group, AIG, AllState, Erie Insurance, Fireman's Fund and Liberty Mutual.
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Resources
- Photo Credit whostolemyidentity.com
