Identity Theft Insurance: A Guide

About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients starts with a focus on budgeting, insurance, optimizing employee benefits, investing, and retirement planning. Dream Financial Planning is a Fiduciary Financial Planning firm specifically designed to help individuals in their 30s and 40s take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals. 

In 2021 alone, the FTC received 1.4 million reports of identity theft.¹ Identity theft can happen in a number of ways, including in-person, online, over email or on the phone. However it occurs, identity theft affects a large number of people every year.

Fixing the damage caused by identity theft can cost the victim considerable time and money. That’s where having identity theft insurance can come in handy. Identity theft insurance can be used to help protect yourself against thieves, hackers and other criminal scammers. Here are some of the facts surrounding identity theft insurance so you can make the right decision when it comes to obtaining your own coverage. 

Am I At Risk Of Having My Identity Stolen Or Being A Victim Of Fraud?

There has been an increase in fraudulent and criminal activity. Now more than ever, you may be targeted financially through a variety of schemes. This checklist helps guide the conversation regarding common threats and scams, ensuring that you're informed and actively protecting your identity and assets.

This checklist covers:

• Ways to minimize cyber threats
• Tips to identify common scams
• Steps to take if a client suspects unlawful activity

Long-Term Effects of Identity Theft

It can take months or even years to untangle the path of destruction left by identity theft. This can be difficult and stressful to deal with - especially if you don’t have insurance. You may recover some of the money stolen from you, but not all of the lasting effects will be financial. It can also lower your credit score, make it harder to get a loan and even affect your job prospects. 

Ultimately, you want to do everything you can to protect your identity by keeping your personal information safe. This includes making sure all your records, identification items such as your passport, social security card and birth certificate are all kept in a fireproof safe, and old banking records and statements are shredded. 

When it comes to cybersecurity, keeping all your online information safe from hackers is important. Regularly update passwords, don’t allow other people to access your records and be careful about the information you share on social media. Criminals are always looking for personal information that may make it easier for them to steal your identity or impersonate you. With the information they’re able to find online, they can take out loans or open up credit cards in your name. 

What Does Identity Theft Insurance Cover?

Identity theft insurance will usually, at the most basic level, cover the monetary loss from the theft. It may also cover the cost of restoration services, which includes a case manager or fraud specialist that will be able to do the legwork to help you recover your identity. 

The cost to replace your identification papers, such as your passport and birth certificate, will be covered as well. If you need an attorney, your legal fees will also be covered under your identity theft insurance policy.

How To Get Identity Theft Insurance

Certain homeowners insurance policies, or even renters insurance, will offer a rider or endorsement at an additional cost to you. This would act as an extension of your regular policy that covers identity theft. It might be an extra couple of bucks per month, but it will cover losses or other expenses typically not protected by your normal homeowner's policy. 

Before you decide to purchase identity theft insurance, it’s important to find out what the policy limits are, how much your deductible will be, how much money loss it actually covers and if legal fees or restoration services are included. The more comprehensive and complete the policy is, the more you’ll be covered if identity theft, unfortunately, happens to you. 

Complimentary Consultation

With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.

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