Is identity theft insurance worth it?

To say the word “insurance” doesn’t inspire confidence nowadays is putting it lightly. With policies that often feel convoluted and exclusions buried in fine print, it’s easy to be skeptical. So, is identity theft insurance worth it? Well, the answer depends on your circumstances.

For instance, identity theft insurance could be wise if you manage multiple financial accounts, use public wi-fi, or share personal info online. It’s beneficial for parents of kids who are active online or anyone who’s had their identity stolen before.

Let’s get into what identity theft insurance is, what its benefits are, and whether it’s worth the investment for your case. We can then look at some of the best insurers on the market and some helpful ID theft prevention tips if you’d rather handle things alone.

What is identity theft?

As the name implies, identity theft means someone gains access to your private details (e.g. financial information, account passwords) and uses them for fraudulent activities.

According to the FTC’s Sentinel Network, over 840,000 identity theft cases were reported in 2024, resulting in over $10 billion in losses. This situation will only worsen due to AI-driven scams and an increasing number of data breaches.

What is identity theft insurance?

Let’s get this out of the way first: identity theft insurance doesn’t prevent identity theft. If you fall victim to a scam, the damage is already done.

Related: Identity theft scams: How to spot and avoid them

What it can do, however, is help with the frustrating follow-up, whether it’s recovering lost funds, handling legal issues, or other related tasks. Essentially, providers soften the blow of identity theft and help you bounce back as soon as possible.

What does identity theft insurance cover?

When you’re in a pinch, identity theft insurance kicks in and typically covers the following:

• Legal fees for identity restoration
• Potential income loss due to time spent resolving the issue
• Credit monitoring and reports
• Fraudulent charges on credit cards or bank accounts
• Costs of replacing stolen documents (e.g., passport, driver’s license)
• Expert assistance with recovery
• Handling fraud reports and alerts

Some plans may even cover caregiving services for children or family members with special needs while you handle recovery. Others may have you work with an expert to improve your cyber security or recover lost data. More rarely, you can expect coverage for extras such as travel, housing, or living expenses.

Is identity theft insurance worth it? Things to factor in

While it’s not the perfect safeguard, identity theft insurance is worth it if you tick any of these boxes:

• You’ve experienced identity fraud before: Scammers repeatedly target the same victim, so having insurance is a great way to spot suspicious activity and avoid further damage.
• You manage multiple credit cards: Juggling several credit cards increases the risk of unauthorized charges slipping through. Identity theft protection can flag suspicious activity quickly.
• You often post private data online: Even something as innocuous as mentioning a former teacher can provide hackers with details to craft targeted phishing attacks.
• You use unprotected networks: Public wi-fi can be dangerous, as hackers use packet sniffers and other tools to harvest sensitive data. Ideally, you should use public hotspots with a VPN, but identity theft insurance is a solid backup if you forget.
• You’ve recently moved or relocated: New addresses can lead to lost or misdirected mail, making it easier for fraudsters to intercept sensitive documents. Protection services can help spot red flags.
• You have a strong online presence: The broader your audience and the more online contacts you have, the more avenues cyber criminals have to steal your data through phishing scams.
• Your child spends time online: Over 1 million children were identity theft victims in 2020, according to the FTC. Kids often don’t recognize online risks, so they can become easy targets for ID theft by using devices for school or entertainment.

Consider what you have to lose

Are you worried about lowering your credit score, being unable to find a job, or taking out a loan? These are all potential consequences of ID theft, so if you want that extra peace of mind, it may be worth adding insurance to your monthly budget.

Fixing the damage, dealing with creditors, and resolving disputes after the fact can also be stressful and time-consuming. If you value your time and mental health over the equivalent of a standard Netflix subscription, then identity theft insurance could be a worthwhile investment.

That said, if you’re confident you can handle the pressure and time commitment or are financially secure enough that concerns about credit scores, loans, and job hunting don’t hit as hard, you should be fine without it.

What are the best identity theft insurance providers?

Our guide to the best identity theft protection services offers a more detailed look at each insurer, but here’s a quick rundown:

1. LifeLock: Our first choice. Comprehensive identity protection with real-time alerts, credit monitoring, and recovery services. Plans include up to $1 million in coverage for identity theft-related expenses and $25,000 in stolen funds reimbursement.
2. IdentityForce: Offers robust monitoring services, including credit and dark web surveillance. Their plans come with recovery assistance, identity restoration, and a proactive approach to data breach alerts.
3. Identity Guard: Features AI-powered (IBM Watson) fraud prevention, alerts, and risk management. Includes credit and dark web monitoring, as well as identity theft insurance for restoration of lost funds and damages.
4. Aura: Combines identity theft monitoring with financial protection, real-time alerts, and extensive fraud detection. Aura offers tools to safeguard your credit, bank accounts, and personal data online.
5. IDShield: Provides extensive credit and identity monitoring, along with financial and legal support. Their plan includes identity restoration, credit report access, and dedicated recovery assistance for identity theft.
6. Identity Protect: Offers multi-layered identity protection, including monitoring of credit, public records, and personal information. Features 24/7 fraud detection and up to $1 million in recovery benefits.
7. Experian IdentityWorks: Monitors credit reports from all three major bureaus, provides identity theft insurance, and offers quick resolution with a team of recovery experts. You get alerts for suspicious activity on all your important accounts.
8. Identity Defense: Among the cheapest options available, though their offering may feel a little basic if you have a more complex financial situation.

Still unsure about insurance? Here are some alternatives

Here’s what you can do if you’re still on the fence about identity theft insurance being worth it:

Take steps to prevent identity theft

Follow these tips, and you’ll be well ahead of any potential threats, reducing the chances of identity fraud in the first place.

1. Use a reputable password manager: They usually have strong password generators and can help you secure and keep track of the myriad of accounts, credit card numbers, and other sensitive info we have to deal with nowadays.
2. Set up two-factor authentication (2FA): Whether it’s SMS-based, through an authenticator app, or biometric data (face/fingerprint scan), 2FA is the best deterrent against cybercrime of any kind.
3. Install a VPN: These apps encrypt your online data, making it unreadable to any outsiders monitoring your traffic. Some of the best VPNs (e.g. NordVPN, Surfshark) are partnered with identity theft insurance firms and may offer coverage on higher-tier plans.
4. Freeze your credit: Contact the “big three” bureaus (Equifax, Experian, Transunion) and ask them to freeze your credit for free. Just keep your freeze PINs safe, and no scammer can open an account in your name. They process thaw requests pretty fast, a minor inconvenience compared to weeks of identity theft recovery.
5. Proper document handling: Locking your Social Security card, passport, birth certificate, and others in a safe is a good start. You should also shred documents with sensitive data before throwing them out and store IDs or other important cards separately from your wallet to avoid long replacement times after theft.
6. Stay ahead of phishing scams: A good rule of thumb is never to share private info over the phone, email, or other channels. You can always call your bank or the government agency to confirm if they need any of your details (spoiler: they never do).

See if you’re not already covered

Following a data breach, many companies offer to monitor your credit for free or cover restoration costs for a limited time.

Visa, Mastercard, and other credit card companies, banks, or financial institutions have built-in ID theft protections, though usually without insurance or as many benefits as a paid program. You may also have identity theft coverage in your homeowners or renters insurance or as part of your employment contract.

Try self-monitoring and recovery

As mentioned, ID theft insurance isn’t a prevention measure, just a way to lessen the financial burden that comes afterward. So, if you don’t mind spending a few hours each month reviewing financial statements and credit reports, you can always do so without relying on an insurer.

Free, government-assisted recovery is also available through identitytheft.gov, though online opinions about the service are split. Some users find it helpful for guiding them through recovery steps, while others feel it’s slow or lacks personalized support. Still, it’s a good starting point if you’re handling identity theft alone.

See more: How to check if someone is using my identity

Is identity theft insurance worth it? FAQs