Is Identity Theft Insurance Worth the Money?

Whether you’re working to build credit, or you just want to ensure that your current good credit isn’t compromised, you’ve probably worried about identity theft. What would happen if somebody stole your credit card and used it?

One possible way to safeguard your credit is buying identity theft insurance. Like all insurance, it offers some protection in case the worst should happen. But… is it worth the expense? Let’s talk about the potential risks and rewards of protecting your identity by insuring it against fraud.

What Is Identity Theft Insurance?

Identity theft insurance is a type of insurance that reimburses victims of identity theft for costs associated with the crime. Some of the expenses that may be covered include:

Phone bills
Lost wages
Notary services
Certified mailing costs
Attorneys’ fees

The coverage varies from insurer to insurer, so as is the case with any policy, make sure to read the fine print so you know what’s covered.

Some companies also provide their clients with a restoration service. That means you’ll have somebody to walk you through the process of recovering your identity.

Where Can You Buy Identity Theft Insurance?

Some companies that sell homeowner’s or renter’s insurance include a provision to replace lost cash or credit cards. However, the coverage is generally capped. The standard is $200 in cash and $50 for credit cards. That’s not a lot of protection.

There’s also a chance you may be able to add an identity theft rider to an existing policy that doesn’t have one. You’ll have to check with your insurance company to find out if they can do that.

The good news is that these riders aren’t very expensive. A standard price for one would be $25 or $50 on top of your existing premium.

What Are the Advantages of Buying Identity Theft Insurance?

There are some advantages to buying identity theft insurance. Here are some things to consider:

Identity theft insurance may provide you with some peace of mind when you use your credit card. You’ll know that if someone steals your identity, you have some protection in place.
This is not expensive insurance, so you won’t have to spend much to get the coverage you want.
Given how many places we use our credit cards – in person and online – there are many opportunities for criminals to try to steal your identity. Insurance can offer you some protection.
If you’re nervous about navigating the aftermath of an identity theft, having a policy that offers a restoration service may be worth the money.

If knowing you have protection is important to you, you may decide that it’s worth the money to pay the premiums for this coverage.

What Are the Disadvantages of Buying Identity Theft Insurance?

Now let’s look at the disadvantages of buying identity theft insurance. We think it’s important to be realistic about the limitations of this kind of coverage.

Identity theft insurance usually offers only limited coverage. It’s rare to find a policy that will cover legal expenses, for example, and you may have to pay a higher premium to get the kind of coverage you want.
Buying identity theft insurance only helps you after the fact. In this way, it differs from a credit monitoring service, which will track your spending for unusual charges and notify you when they occur.
Your credit card issuer will have protections in place to ensure you don’t end up on the hook for charges made by somebody else. In many cases, if you notify your credit card company immediately, you’ll only be responsible for $50 of charges.
A policy without a restoration service won’t help you do what you need to do to restore your credit. You’ll need to handle that aspect of recovery on your own.

The takeaway here is that in most cases, identity theft insurance offers only limited protection.

Should You Buy Identity Theft Insurance?

The question is this: should you buy identity theft insurance? We can’t give you an answer on that, but here’s what we suggest thinking about.

Most identity theft insurance policies offer very limited protection, but they are reasonably priced. If you think you would feel better having some protection in place, then buying insurance may help provide it.

A policy that covers legal fees and offers a restoration service would give you the most protection. You may have to shop around a bit to find one that offers both, and the premiums may be a bit higher than they would for a less inclusive policy. But, if you’re worried about identity theft and want the protection, then it may be worth it.

Identity theft insurance offers limited protection and some peace of mind to credit card holders. All of Addition Financial’s Visa credit cards are secured with Visa’s Zero Liability fraud protection as well as Visa purchase alerts. You’ll get real-time alerts whenever a purchase meets the criteria you selected during enrollment – whether that’s reaching a purchase amount threshold, international purchases or purchases made on the internet or over the phone. Learn more about the security measures of our Visa credit cards and how to apply here.