The Identity Theft Resource Center (ITRC) published a Fact Sheet that outlines the various types of identity theft protection programs. Naturally they cover credit monitoring, identity theft resolution and identity theft reimbursement programs. They also discuss identity theft insurance, which may be the biggest reason you are at risk of identity theft… because you think you have that covered.
If you talk to your insurance agent about identity theft, they will probably tell you it’s covered under your homeowner’s policy. The point is to give you peace of mind that you have that protection in place, but this is often a false sense of security. So when you do have that conversation with your agent, make sure to cover a couple of key areas:
Identity Theft Reimbursement
You never get back the money you lose. Most of the programs offered by insurance companies (as well as several private companies) tell you they will pay your out-of-pocket expenses. This means things like cost of postage, long distance phone calls, maybe even time off work (more about this in a minute.) It does not mean they will give you the $2,500 an identity thief took from your bank account – you will have to deal with your bank directly on that, and it’s iffy ground at best, just ask Village View Escrow.
You might pay taxes on your insurance money. Yup, you read right. When your identity theft reimbursement program pays you wages you lost, expect to get a 1099 form at tax time. You have to claim that money as income, and pay taxes on it. It makes sense when you think about it, since your wages would have been taxed if you’d been able to work, but it still feels like adding insult to injury.
Do I have to use PTO first? Some identity theft insurance policies require you to use your own time before you use your insurance benefits. This might make sense if you get your identity theft protection as part of an employee benefits package, but if otherwise it shouldn’t be part of your policy – well, ethically, anyway.
Pre-existing identity theft should be covered, as long as you didn’t know about it beforehand. The ITRC says “A contract clause denying coverage for a pre-existing identity theft case is the one that most consumers discover after the fact and then find themselves without assistance.” Be sure to discuss this “loophole” with your agent.
Will my rates go up? This is a big question if you have an identity theft claim, since they are usually associated with a homeowner’s policy. If rates go up at all, make sure it is only the premium for the identity theft rider, which could cost as much as $50/year (although many policies include this at no additional charge.)
