Identity Theft Insurance, What It Covers, When You Need It, and How to File a Claim

Identity theft can derail your finances, ruin your credit, and create a bureaucratic nightmare. The average identity theft victim spends over 100 hours and $1,343 out of pocket restoring their identity, according to a 2023 Javelin Strategy report. Fortunately, identity theft insurance can help ease the financial and logistical burden. But what exactly does it cover—and is it worth it?

This comprehensive guide explains what identity theft insurance is, the differences between homeowners policy endorsements and standalone coverage, how to choose the right policy, and what to do when filing a claim.

I. What Is Identity Theft Insurance?

Definition and Purpose

Identity theft insurance, also called identity fraud reimbursement, helps cover the out-of-pocket costs you incur when recovering from identity theft. These include:

• Legal fees
  
• Lost wages
  
• Postage and notary costs
  
• Certified mail
  
• Restoration services (fraud specialists or private investigators)
  
• Document replacement

It does not typically reimburse stolen funds—those are usually covered by your bank or credit card provider under fraud protection policies.

Major Providers

Leading companies offering identity theft insurance include:

• State Farm
  
• Nationwide
  
• Travelers
  
• LifeLock
  
• IdentityForce
  
• Aura
  
• Identity Guard

Some offer it as a standalone product, while others provide it as an add-on endorsement to homeowners or renters insurance.

Related article: Can Someone Steal My Identity if I lost My Wallet?

II. Homeowners Insurance vs. Identity Theft Coverage

What Standard Homeowners Policies Cover

A traditional homeowners policy does not cover identity theft. It focuses on tangible personal property (e.g., electronics, furniture) and physical theft or damage from events like fires or break-ins.

Some limited coverage exists for:

• Cash or wallet theft at your residence (usually $200–$500)
  
• Liability for bodily injury or property damage—but not for identity fraud

Why Identity Theft Isn’t Covered

Homeowners insurance is designed for “first-party property” loss—not intangible financial crimes like fraudulent credit card use or loan applications.

III. Identity Theft Endorsements for Homeowners Insurance

You can usually add an endorsement to your homeowners, renters, or condo insurance for identity theft protection.

What It Covers

Expense Type	Coverage Includes
Restoration Services	Fraud specialists, private investigators, case managers
Lost Wages	If you take unpaid time off work to handle identity recovery
Legal Fees	For court appearances or clearing your name
Notary/Postage Fees	Mailing affidavits and supporting documents
Document Replacement	Passports, Social Security cards, driver’s licenses
Credit Monitoring	Alerts for unauthorized inquiries, changes of address, and dark web scans
Child/Elder Care	Reimbursement for substitute caregivers while you handle recovery tasks

Coverage Limits and Deductibles

• Limits: Typically $15,000 to $25,000 per year
  
• Deductibles: Often $0, though some carriers charge $100–$250

Cost

• Annual Premium: $25–$60/year (about $2–$5/month)
  
• Factors That Influence Cost:
  
  • Location (e.g., high-crime areas)
    
  • Chosen coverage limits
    
  • Insurance provider

How to Add an Endorsement

1. Review your current homeowners policy
   
2. Contact your insurer or agent
   
3. Request an “identity theft endorsement”
   
4. Sign the endorsement form
   
5. Verify coverage in your updated declarations
   
6. Confirm waiting periods (typically 30 days before benefits apply)

Interaction with Other Policies

• Umbrella Insurance: Usually does not include identity theft, but you may get discounts if bundled
  
• Renters & Auto Policies: Some insurers offer similar identity theft endorsements for these
  
• Cyber Insurance: Distinct from identity theft insurance—focuses on device breaches and ransomware

IV. Standalone Identity Theft Insurance

When to Consider Standalone Coverage

• You don’t own a home
  
• You need higher limits ($100K–$500K+)
  
• You want robust digital security and monitoring tools

Comparison of Top Standalone Providers

Provider	Annual Cost	Coverage Limit	Key Features
Aura	$80–$120	$100,000	Dark web scan, VPN, crypto monitoring
LifeLock	$150–$200	$1,000,000	Bundled with Norton 360, device protection, bank takeover alerts
IdentityForce	$100–$130	$250,000	Child ID monitoring, device scanning, dark web alerts
IDShield	$70–$90	$100,000	Family plans, VPN, $1M stolen funds insurance (with subscription)
Norton LifeLock	$120–$160	$1,000,000	Antivirus, credit monitoring, SSN trace, social media scanning

Eligibility and Requirements

• Credit Score: Minimum often 600–650
  
• Criminal History: Past fraud convictions can disqualify you
  
• Residency: Must live in the U.S.; some states (like TX or MA) may have limitations

Additional Benefits

• VPN & Antivirus Bundles
  
• Password Managers
  
• Emergency Cash Advances
  
• Family Identity Monitoring
  
• Credit Freeze Assistance

V. How to File an Identity Theft Insurance Claim

1. Notify Authorities and Your Insurer

• Contact your insurer immediately (within 30–60 days)
  
• File a police report detailing how your identity was stolen
  
• Submit an FTC complaint via IdentityTheft.gov

2. Collect Documentation

Document	Purpose
Police Report & FTC Complaint	Confirms the crime occurred
Proof of Financial Loss	Bank/credit card statements, collection letters
Sworn Statement of Loss	Notarized affidavit explaining the theft and costs
Receipts & Invoices	Restoration expenses—legal, mailing, phone, credit report fees
Proof of Lost Wages	Pay stubs or employer letter confirming unpaid leave

3. Submit the Claim

• Use your insurer’s online portal or paper form
  
• Attach all documentation
  
• Follow up with your claims adjuster or agent
  
• Track reimbursements and resolution progress

Final Thoughts: Is Identity Theft Insurance Worth It?

Identity theft insurance won’t replace stolen money, but it can save you thousands in legal and recovery fees—and spare you the headache of handling the process alone. It’s particularly valuable if:

• You want professional restoration support
  
• You travel often or manage sensitive financial data
  
• You’re responsible for children or elderly family members

Whether you add an endorsement to your homeowners policy or buy standalone coverage, identity theft insurance can offer peace of mind and financial relief when your personal data is compromised.