Identity Theft and Insurance

Steps and advice to help protect you from identity predators.

Identity theft victims often spend months or years recovering from the frauds perpetrated on their bank accounts and getting their credit rating corrected. Protect yourself against identity theft with this advice.

What is identity theft?

Identity theft is the act of taking personal information — like Social Security or bank account numbers— and using it to “impersonate” someone for the purpose of stealing.

These crimes are usually financial. For example, identity thieves may use stolen credit card numbers, take money from victims’ bank accounts, or open unauthorized credit cards or bank loans. In more elaborate schemes, criminals even use the stolen personal information to get a job, take out an insurance policy, rent a home or take out a mortgage in the victim’s name.

 How do the identity thieves steal information?

  • By stealing or otherwise obtaining physical documents – Many identity theft cases are the result of a lost or stolen wallet, checkbook, credit card or other physical document. More intrepid thieves use old-fashioned methods, such rooting around in people’s garbage to collect financial information.
  • By stealing or obtaining hardware – Your laptop, thumb drives and other electronic data storage devices are a rich source of your personal information.
  • By coaxing personal information via phone calls – Unless you yourself have initiated the phone call, do not give any private data to callers. Legitimate financial institutions and businesses make it a point to keep information secure and will not ask to you provide it over the phone.
  • By obtaining personal information via online means – Some identity theft schemes use online scams like ‘phishing’ — where thieves use email inquiries purporting to be from financial or other online organizations to obtain sensitive account information. Identity theft is a potential problem when computer servers at large institutions are hacked and breached, or with online shopping or other websites that don’t have security safeguards in place.

What is the impact of identity theft?

Victims of identity theft fraud often travel a long and frustrating road to recovery. Depending on the severity of the identity theft fraud damage, the recovery process (including getting credit records corrected) can take anywhere from a few weeks to several years. In the meantime, victims are often left with lower credit scores and may have difficulty getting credit, obtaining loans and even finding employment.

 Does insurance cover identity theft?

With most credit cards, once you’ve reported the card missing, you’re only liable for a stated amount of the fraudulent charges. Homeowners and renters insurance policies may provide a limited amount of protection for loss of cash or credit cards.

However, identity theft comes with not only financial loss, but consequences like blows to your credit and reputation that may take time and paid professional expertise to resolve. As a result, many companies now provide insurance products that not only cover costs associated with identity theft incident recovery, but also provide “restoration” services to make the process easier and faster.

Policies vary by insurer and by state, but some of the coverages and services that may be provided include: assignment of a consumer fraud specialist or case manager, replacement of government-issues identifications, reimbursement of an attorney’s fees and more.

What to do if you’re an identity theft victim

  • If you think your personal information has been compromised, immediately report it to the credit card company, applicable financial institutions and the police. Ask for a copy of the police report; you will need it if you want to file an insurance claim.
  • If you are—or suspect you’ve been—the victim of a phishing scam or other electronic incident, immediately report the incident to any of your financial institutions or credit card companies that might be compromised, and register a fraud alert with a credit reporting company.
  • Learn more about potential large-scale data breaches and privacy issues from organizations such as the non-profit Privacy Rights Clearing House.
  • Report identity theft incidents or attempts to federal agencies that monitor them, such as the FBI Internet Crime Complaint Center and the Federal Trade Commission (FTC) Consumer Information Identity Theft, which can provide further advice and assistance.

Abridged version reprinted with permission of the Insurance Information Institute.