What Is Identity Theft Insurance — And Do You Need It?

So you've frozen your credit. You're monitoring your accounts. You've even scrubbed your personal info from the internet.

But then someone asks: “Do you have identity theft insurance?”

What Is Identity Theft Insurance?

Identity theft insurance helps you recover if someone steals your identity. It doesn’t prevent fraud — but it can soften the blow if it happens. Let’s break down what it is, what it covers, and whether it’s worth it.

What It Typically Covers:

• Lost wages due to time spent recovering your identity

• Legal fees related to identity restoration

• Costs to notarize documents or mail dispute letters

• Help from a fraud specialist or recovery advocate

Some policies include identity monitoring — others are just for reimbursement.

What It Usually Doesn’t Cover:

• Direct financial losses (like stolen funds or fraudulent charges)

• Emotional distress

• Future damage to your credit score

Your bank or credit card may already protect you from unauthorized transactions — so insurance often focuses on recovery costs, not replacing stolen money.

How Much Does It Cost?

Many plans cost $5–15/month, depending on coverage. You may already have it bundled through one of the following if you have it:

• Your credit monitoring provider

• Your homeowner’s or renter’s insurance

• Your bank or employer (worth checking!)

Do You Need It?

It depends on your risk and comfort level.

You might want it if you:

• Have been part of a major data breach

• Are a caregiver or power of attorney

• Travel frequently or move often

• Want expert help if something ever happens

You might skip it if you:

• Already froze your credit

• Have time to handle things yourself

• Would rather invest in prevention tools

Our Final Thought:

Identity theft insurance is like a fire extinguisher. You hope you never need it — but you’re glad it’s there if you do. It’s not essential for everyone, but for some, it’s peace of mind worth having.