Identity Theft Insurance - Should You Get One?

Despite the recent drop in cases of identity theft and fraud among adult Americans (from over 10 million in 2003 to 9 million for 2006), a significant market still exists for identity theft insurance. Part of the reason is the many horror stories played up in the media, but it is also partly because identity theft insurance costs are very low.

Many find it better to purchase a $25 identity theft insurance policy than to have to worry about the consequences of an increasingly electronically driven lifestyle.

So you have companies like MetLife Auto & Home, American International Group, Travelers, Farmers Group, etc. offering identity theft insurance.

Aside from entry-level $25 policies (which offer $15,000 worth of coverage), these companies also offer $50-$60 policies (approximately $25,000 in coverage).

All these factors have combined to make identity theft insurance the fastest growing insurance product in years.

Experts suggest that your identity theft insurance plan, if you do decide to get one, should only be a rider on your existing policy, so check first with your insurance company.

But do you really need identity theft insurance? Well if you ask your insurance company (or surf their website), they'd probably make a pretty convincing case for buying some. What you don't hear to often is the case AGAINST buying identity theft insurance.

Identity Theft Insurance - Why Experts Say You May Not Need It?

Identity theft insurance was designed to pay for the cost of fixing your credit standing. This may include reimbursements for notary costs, telephone bills, certified mailing expenses, lost wages, loan re-application fees, and certain legal fees.

So why shouldn't you avail yourself of identity theft insurance? Critics offer these five reasons.

1. It may increase your risk of being victimized because it makes you complacent.
2. The seemingly low policy cost is not good value compared to the risks.
3. Your bank, credit card company, or broker will cover losses that are a direct result of identity theft anyway.
4. It isn't real insurance as it won't fix the poor credit rating or erase the criminal record generated by the theft.
5. You'd still have to go through the long, tiresome process of fixing the problem yourself.

Although cases of identity theft are indeed going up, some statisticians peg the odds of being victimized as not worth the cost. What's more, the FTC says that less than half the victims spend more than $1,000 to fix the problem.

The only thing that the American insurance industry and critics of identity theft insurance agree on is this: the best insurance is still prevention.