Can You Add ID Theft Protection to Your Homeowner's Insurance?

All the high-profile data breaches of late may have caused many consumers to become familiar with ways of protecting themselves from and in the case of identity theft. Credit monitoring and credit freezes are commonly known ways to spot and mitigate the effects of serious fraud, but you may also be able to find some help in a less obvious place: your homeowner’s insurance policy.

Many insurance companies give consumers an option to add identity theft riders to their homeowner’s insurance policies. The coverage isn’t designed to help you prevent identity theft. Rather, it would provide some assistance if you were a victim. For instance, “if your credit card was used, [a case worker] would contact the credit card company for you,” Zig Tekeste, a State Farm Insurance agent, said. “They would work with the three credit bureaus” to have any inaccurate information appearing on your credit reports as a result of the fraud removed as well.

The coverage could also reimburse you for “any expense that would arise for the efforts of you reversing the effects of the ID theft,” Tekeste said. For instance, you could potentially file a claim for certain legal fees or banking fees you incur to correct your identity and credit records. Policies can also cover lost wages if you had to take a day off from work to get the issue sorted, he said.

Gauging a Policy

Identity theft insurance typically costs between $25 and $60 per year with policy limits of $10,000 to $15,000, according to the National Association of Insurance Commissioners. Of course, not all policies are created equal so it’s in your best interest to read the fine print associated with any offer to determine whether it (or identity theft insurance in general) is right for you. The NAIC suggests reviewing your current homeowner’s insurance policy to see if you already have these types of protections or if they could be added for a nominal fee. When comparing policies, you may want to consider whether there is a deductible, limits on what fees can be reimbursed and a preapproval requirement for legal work.

Keep in mind, identity theft insurance riders and/or policies generally do not cover direct monetary losses incurred as result of fraud — and they won’t prevent it from happening. To minimize the odds of having your identity compromised, you can shred important documents, keep your computer spyware up to date and use strong passwords to protect your financial accounts.

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You can also mitigate the effects by regularly checking your credit since unfamiliar items on your credit report, like an unauthorized inquiry or a mysterious new loan account, can be signs your identity has been stolen. You can pull your free annual credit reports at AnnualCreditReport.com or see your free credit report summary each month on Credit.com.