Identity fraud is at an all-time high, victimizing 16.7 million people in the U.S. in 2017 alone. And it goes without saying that undoing the damage of identity theft can be a nightmare. (We all remember the now-infamous Equifax data breach.)
Consumers are understandably nervous about protecting their personal financial data, but is identity theft insurance worth it? Let's unpack the details.

What Identity Theft Insurance Covers

While this type of protection doesn't actually prevent identity theft, it does make the recovery process a little easier. Getting your credit back in order can be a hassle, from disputing fraudulent charges and accounts to replacing your ID or Social Security card. It's a cumbersome, time-consuming process that could result in lost wages and even legal fees. The good news is that most identity theft policies will reimburse you for these costs and assist you in cleaning up the mess.
Credit monitoring comes standard in most plans. This means if someone opens an account in your name, you'll be alerted soon after, giving you a head start on setting the record straight and preventing further damage. Just keep in mind that you can monitor your credit yourself by routinely checking your credit report. Every year, you're allowed one free copy from each of the major credit bureaus (Equifax, Experian and TransUnion) through AnnualCreditReport.com — and checking your own credit won’t ding your score.
As a preventative measure, you can also freeze your credit free of charge, which requires lenders and creditors to get your explicit permission before viewing your credit report before, say, taking out a new loan.

What Identity Theft Insurance Doesn’t Cover

According to the National Association of Insurance Commissioners (NAIC), identity theft insurance does not cover direct losses suffered from the theft itself, but rather the expenses incurred straightening out the mess after the fact.
In other words, it won’t cover the cost of that pair of sneakers an identity thief charged to your credit card, but it may cover legal costs you paid to clear up your name. The silver lining here is that banks and credit card companies are generally good about covering fraud-related charges if you report the identity theft quickly.

Who Might Consider Identity Theft Insurance

Folks who prefer to outsource the task of monitoring their credit may benefit from this type of coverage. It also helps provide peace of mind because most insurance providers will help walk you through the recovery process in the event your identity is stolen. (FYI, those without coverage can also access free help via IdentityTheft.gov, which is backed by the Federal Trade Commission.)

How Much Identity Theft Insurance Costs

Coverage varies depending on the company you go with and the type of plan you choose. Identity theft insurance typically runs between $25 and $60 per year, according to the NAIC. Just be sure to read the fine print of your policy as most cap coverage at around $10,000 to $15,000. Some policies also have deductibles you have to meet before coverage kicks in.

Where to Buy Identity Theft Insurance

If you're a homeowner, check with your insurance company to see if you can add identity theft coverage to your policy. (It's usually the most cost-effective way to go.) Alternatively, identity protection companies like LifeLock and ID Watchdog offer their own policies. Shop around, compare quotes and pore over the fine print to find the policy that makes the most sense for you.