In an era of unprecedented digital vulnerability, identity theft has become more than just a potential risk—it’s a growing epidemic. The 2023 Identity Fraud Study by Javelin Strategy & Research reveals a staggering statistic: consumers lost $22.5 billion to identity theft in 2022 alone, with nearly 40 million Americans experiencing some form of identity fraud.

The digital landscape has transformed how cybercriminals operate. What was once a rare occurrence has now become a constant threat, affecting individuals across all demographics. From sophisticated online scams to data breaches that expose personal information, the methods of identity theft continue to evolve at an alarming rate.

For many, the financial and emotional toll of identity theft extends far beyond a simple monetary loss. It can mean weeks or even months of stress, countless hours of paperwork, damaged credit scores, and the overwhelming task of reclaiming your personal and financial identity.

Identity theft insurance has emerged as a potential lifeline for those seeking protection in this increasingly complex digital world. But what exactly is it, and can it truly provide the security you’re looking for?

“The Federal Trade Commission reported, from 2019 to 2020, the number of fraud reports increased 21% from 1.9 to 2.3 million.” (source)

In this article, we’ll be talking about what identity theft insurance is, how it works, and whether or not it is right for you. We’ll also provide alternatives if you don’t think identity theft insurance is the right product for your lifestyle, but you are still interested in investing in a security solution to secure your identity.

 

What is Identity Theft Insurance?

Identity theft insurance is a financial safety net designed to help victims recover from the devastating impacts of identity fraud. According to a 2023 Experian survey, the average identity theft victim spends approximately 200 hours and $1,343 in out-of-pocket expenses navigating the aftermath of a single identity theft incident.

Unlike traditional insurance that prevents loss, identity theft insurance is a reactive service that provides critical support when the worst happens. Typical policies cover:

• Reimbursement for legal fees
• Costs associated with credit report repairs
• Lost wages from time spent resolving identity theft
• Expenses related to document replacement
• Professional assistance in recovering your identity

The demand for such protection continues to grow. A recent study by the Identity Theft Resource Center found that 33% of Americans experienced some form of identity theft in 2022, with financial losses reaching unprecedented levels. This staggering statistic underscores why more individuals are turning to identity theft insurance as a crucial component of their personal financial protection strategy.

Think of it as a comprehensive support system that kicks into gear the moment your personal information is compromised. It’s not just about financial reimbursement—it’s about providing peace of mind and professional guidance during one of the most stressful experiences a person can face.

How Does It Work?

Identity theft insurance provides coverage and remuneration if your identity is stolen. As data breaches and hacking attempts become more brazen and commonplace, the likelihood of your identity being stolen is only going up.

This type of insurance provides compensation for legal fees, credit monitoring, and expert assistance when your identity is stolen. Some insurance plans include loan reapplication fee coverage, lost wages from an employer, and additional credit report monitoring coverage as you work to re-secure your identity.

However, there’s a lot that most identity theft insurances policies don’t cover, and the biggest one is stolen funds reimbursement. While many identity theft insurance policies cover the expenses incurred to undo the damage when identity theft occurs, they don’t actually cover stolen money. Stolen funds reimbursement is the technical name for a policy that would reimburse you, or cover, those funds that were stolen. While coverage for services such as legal fees is great, not having stolen money returned can be a deal breaker for some people considering identity theft insurance.

How to Get Identity Theft Insurance

Identity theft insurance is like most major forms of insurance coverage in that you can apply for it. Unlike home insurance coverage, you’re unlikely to be denied coverage since the asset being insured is your digital identity. Homes can be denied based on age, type of roof, flood zone placement, and inspections. Your digital identity simply needs to be insured in case of identity theft.

The process is relatively simple. First, you find an insurance carrier that offers identity theft insurance. Then, you either go through the application process online or over the phone. If it’s a company that you have other insurance policies with already, you may be able to tack on identity theft insurance without going through the full application process.

Usually an answer is provided immediately. Follow the directions provided by the insurance company to finish setting up your policy (identity information, payment options, etc.) and then you’ll be insured in case of identity theft.

The process is different depending on the insurance company offering the policy, but the process is usually straightforward. Follow the given prompts either online or over the phone and you’ll be able to buy identity theft insurance in no time.

Is It Worth It?

For some people, identity theft insurance provides the peace of mind of knowing that they will have coverage and assistance if their identity is stolen. If you are worried that you are in an at-risk group regarding identity theft, an insurance policy can help you feel more secure in case of theft. If your concern is that you have a significant amount of assets that could be targeted by identity thieves, an identity theft insurance policy can help cover the costs of litigation and fees in regaining your identity from cybercriminals.

For others, knowing that most policies don’t provide stolen funds reimbursement is a deal breaker on identity theft insurance all together. Our experts recommend that identity theft protection services are a better use of digital tools, as well as the cost of the service. It is also worth noting that for many victims of identity theft, the average claimed loss is less than the cost of monthly identity theft insurance coverage over time. If you are cost-conscious, we recommend putting your funds and energy into protection services and learning what habits and lifestyle changes will keep your identity protected.

And finally, you may add this form of insurance as a supplement to other cybersecurity and identity theft protection solutions. If identity theft insurance is included in your main identity theft protection solution, then you may not mind having that additional coverage. Having an additional insurance policy won’t cause any harm besides the cost of a monthly policy fee.

Our expert advisors recommend identity theft insurance if you find that it provides you with a sense of security regarding identity theft. However, they also want to ensure that if you do choose to purchase a policy, that you are fully aware of what the coverage does and does not include. As long as you understand that it may not fully reimburse any stolen funds, but you still feel that what the policy does provide has value, then there isn’t any harm in having it.

Alternatives to Identity Theft Insurance

If you don’t think that this type of insurance is for you, you may want to consider identity theft protection service instead. Instead of focusing on coverage after your identity has been stolen, these tools and services focus instead on prevent identity theft in the first place.

Strong identity theft protection services will provide the following tools:

• Dark web monitoring
• Fraud threat alerts
• Credit report monitoring services with the major credit bureaus
• Identity theft insurance coverage
• Fraudulent account alerts

Some identity theft protection services go even further, offering antivirus tools and additional internet security measures. Our experts reviewed identity theft protection services and recommend the following tools to prevent you from being a victim of identity theft.

The top services that our experts recommend for protection from identity theft include:

1. Aura: A total all-in-one solution not just for identity theft but protection from all threats while using the internet, all of us here at Batten are big fans of Aura. Aura’s intuitive UI makes signing up and accessing the home dashboard simple. You can use a password manager, VPN, ID protection, and antivirus with one subscription. Credit monitoring services make it simple to know if there are any threats to your identity. There are no term limits, so you can try Aura risk-free. Aura is best for anyone who is comfortable using standard software tools and browser extensions.
2. Identity guard:For total identity theft protection, Identity Guard offers the best bang for your buck. With two different tiers for accommodating different security levels and budgets, you should be able to find a plan that fits your lifestyle best. Our experts chose Identity Guard because it has comprehensive coverage that monitors your online information on the dark web, alerts you to fraud threats, a thorough credit monitoring service, helps you recover your assets, and includes a $1M identity theft insurance policy. They also liked that its intuitive setup process allows you to sign up and start protecting your online identity in minutes. Additionally, it has 24/7 US-based customer support.

Taking Control of Your Digital Identity

In a world where cyber threats are constantly evolving, protecting your digital identity is no longer optional—it’s essential. The journey to comprehensive digital security might seem overwhelming, but it’s a powerful step towards reclaiming your peace of mind and personal autonomy.

Solutions like Identity Guard and Aura offer more than just protection—they provide a comprehensive shield for you and your family’s digital lives. These services transform vulnerability into confidence, turning complex cybersecurity challenges into manageable, user-friendly experiences.

Your digital identity is more than just a collection of data—it’s the essence of your personal and professional self in the digital age. By taking proactive steps, you’re not just preventing potential threats; you’re investing in your future, your financial security, and your family’s well-being.

Don’t wait for a breach to take action. Your digital security starts now.