Insurance Against Identity Theft: A Quick Rundown

Consumers should carefully check their home insurance policies to see whether they are covered for identity theft. Some insurance companies now include benefit provisions that help identity fraud victims restore their private personal information and credit histories. Identity fraud is an even faster-growing crime during tough economic times.

Every year, Javelin Strategy and Research publishes its Identity Fraud Survey. This study reveals that financial pressures from the current recession are pressuring thieves to commit more identity theft crimes.

These include impersonating celebrities for financial gain, establishing phony insurance policies, opening unauthorized credit card accounts and stealing from bank accounts.

Identity Fraud Crimes Are Accelerating

In 2018, the number of identity theft victims went up 22% compared to the previous year, to a total of 9.9 million Americans. Losses totaled US$48 billion for an average of $4,850 per victim. The greatest increase in identity fraud was for thefts to existing credit card accounts.

The Javelin study also found that female consumers were 26% more likely to fall prey to identity theft. This is partly due to fact that 14% of the time crooks wait over a year before invading woman-owned accounts, compared to just 2% for male victims. Also, women make more in-person buys at stores and restaurants where there is less consumer control.

In the past, many consumers avoided financial transactions via the Internet because they feared identity theft. However, the survey also found that 43% of identity fraud incidents during the past year resulted from decidedly low-tech scenarios, namely: lost or stolen wallets, checkbooks and credit cards. This percentage is up significantly from 33% in 2017.

Other statistics that showed that 25% of identity fraud victims or 2.7 million consumers had their accounts breached because thieves had captured their Personal Identification Number (PIN) codes.

Identity Theft Insurance

Financial institutions including credit card companies and banks often help consumers recover any money stolen by identity thieves, particularly diligent customers who promptly report suspicious activity on their accounts.

What is not covered is the costly and time-consuming processes that individuals have to go through in order to recover from identity fraud schemes.

Insurance Information Institute vice-president Mike Barry explains that several insurance companies sell special riders to home and renters’ policies that cover expenses arising in the wake of an identity invasion.

For example, several policy riders reimburse reasonable expenses incurred by consumers trying to correct their damaged credit records. Eligible charges include telephone bills, lost earnings and mailing costs – provided that the claimant has appropriate receipts.

Subject to an insurer’s prior approval, attorney fees are sometimes also covered. Other identity theft coverages pay for the services of a professional fraud specialist who helps policyholders navigate the tricky processes of restoring their personal and financial identities.

Protecting Against Identity Thieves

While some home insurance policies and special riders can help policyholders endure the trauma of an identity theft, perhaps the best defense against identity fraud crimes is a proactive game plan.

First, consumers who suspect identity theft can visit the National Insurance Crime Bureau (NICB) which dedicates resources to prevent, detect and bring to justice perpetrators of insurance fraud. The NICB has a toll-free hotline for anonymous tips.

In addition, the Insurance Information Institute provides the following tips to protect consumer identities.

  • Always take credit card and automated teller machine receipts; never put these paper slips into public trash bins or leave them on the counter or even in a shopping bag where they can easily fall out or get stolen.
  • Carefully monitor bank and credit card statements to ensure accurate transactions are accurate, and contact the bank or credit card issuer immediately on noticing suspicious activity.
  • Do not place passwords on bank, credit card and telephone accounts that represent easily available information like a birth date or mother’s last name or any series of consecutive numbers.
  • Keep the amount of personal information in a purse or wallet to a minimum, eliminating passports and social security cards – and especially additional credit cards – unless absolutely necessary.
  • Never give out personal information unless 100% sure about a contact and the secured method of communication.
  • Shred any documents that contain personal information such as bank statements, credit card applications or charge receipts.

Winning the Battle for Personal Privacy

Paying premiums for a specialty product like identity theft insurance can limit frightening risks of personal bankruptcy that sometimes accompany identity fraud crimes. Still, the best insurance measures during a steep recession may well be making wise decisions that limit chances for identity thieves to strike in the first place.