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What is Identity Theft Insurance?

A recent Federal Trade Commission (FTC) study found that 8.3 million Americans were the victims of identity theft in 2005, and the number is rising. In at least half of the incidents, thieves obtained goods or services worth $500 or less; however in 10 percent of cases, thieves got at least $6,000 worth of goods or services.

Fifty-six percent of all victims were unable to provide any information on how their personal information was stolen. Identity thieves use personal information to impersonate a victim, stealing from bank accounts, establishing phony insurance policies, opening unauthorized credit cards or obtaining unauthorized bank loans.

Use of stolen credit card and debit card numbers is among the most common forms of identity theft. Some schemes use electronic means, including online scams like "phishing," while others might use more old-fashioned methods, such as “dumpster diving”—rooting around in people’s garbage to collect financial information.

The advent of new, “no-swipe” credit cards that transmit account and user information through radio frequency identification may make it possible, in some cases, for identity thieves to use a simple electronic device to capture the information.

Victims of identity theft are often left unable to use existing credit or obtain a new loan, harassed by debt collectors, are subjects of criminal investigations or civil suits and in some instances arrested.

Identity theft may be covered by insurance. Identity theft protection and resolution service is included in some companies’ homeowner and auto policies at no additional cost. The service provides the consumer with a fraud specialist to assist and guide them through the process of restoring and protecting their identity. Some companies include identity theft coverage as part of their homeowners insurance policy; selling it as either a stand-alone policy or as an endorsement to a homeowners or renters insurance policy. This coverage provides the customer reimbursement for the expenses associated with the identity and credit restoration process including phone bills, lost wages, notary and certified mailing costs, and sometimes attorney fees (with the prior consent of the insurer).

Tips for Avoiding Identity Theft

  • Keep the amount of personal information in your purse or wallet to the bare minimum. Avoid carrying additional credit cards, your social security card or passport unless absolutely necessary.
  • Guard your credit card when making purchases. Shield your hand when using ATM machines or making long distance phone calls with phone cards. Don’t fall prey to “shoulder surfers” who may be nearby.
  • Always take credit card or ATM receipts. Don’t throw them into public trash containers, leave them on the counter or put them in your shopping bag where they can easily fall out or get stolen.
  • Don't give out personal information. Whether on the phone, through the mail or over the Internet, don’t give out any personal information unless you have initiated the contact or are sure you know who you are dealing with and that they have a secure line. Proceed with caution when shopping online. Make sure that you are buying from a reputable retailer with a secure network.
  • Do not fall for online or email scams. Be wary if you receive email solicitations for personal information. In online scams like "phishing," thieves use email inquiries purporting to be from financial or other online organizations in order to obtain sensitive account information.
  • Monitor your accounts. Don’t rely on your credit card company or bank to alert you of suspicious activity. Carefully monitor your bank and credit card statements to make sure all transactions are accurate. If you suspect a problem, contact your credit card company or bank immediately.
  • Order a copy of your credit report from each of the three major credit bureaus. A new law that took effect December 1, 2004, entitles you to one free credit report per year. Your credit report contains information on where you work and live, the credit accounts that have been opened in your name, how you pay your bills and whether you've been sued, arrested or filed for bankruptcy. Make sure it's accurate and includes only those activities you've authorized.
  • Place passwords on your credit card, bank and phone accounts. Avoid using easily available information like your mother's maiden name, your birth date, any part of your Social Security number or phone number, or any series of consecutive numbers. If you suspect a problem with your credit card, change your password.
  • Shred any documents containing personal information such as credit card numbers, bank statements, charge receipts or credit card applications, before disposing of them.

The following companies offer identity theft insurance:

  • Allstate Insurance
  • Chartis Insurance
  • Chubb Group of Insurance Companies
  • Encompass Insurance
  • Erie Insurance
  • Farmers Group
  • Fireman's Fund
  • Liberty Mutual
  • Nationwide
  • State Farm
  • Travelers Insurance
  • West Bend Mutual

Additional Resources

Courtesy of Insurance Information Institute

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Peoria, Arizona 85381

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