Choosing a new insurance policy may not seem like the most glamorous way to spend your time, but neither is wasting dozens of hours and potentially thousands of dollars repairing the damage inflicted by identity thieves.
As a small business owner, you may believe your company doesn’t deal in the vast sums of money that would make you an attractive target for identity thieves. Ironically, however, companies of a smaller size are often a major lure for cybercriminals, who assume these businesses lack the IT infrastructure to adequately protect themselves. This means that small businesses often represent low-hanging fruit for identity thieves.
Although you’ve probably heard of identity theft insurance, do you know exactly what these plans have to offer and whether they could benefit your business? We’ll answer some of the key questions you’re likely to have if you’re considering this type of policy, or even one of the plans mentioned in our guide to the best identity theft protection services.
What is identity theft insurance?
As the name suggests, identity theft insurance is a policy that provides financial protection in the event that a criminal steals your identity.
The level of coverage you receive and the features available will depend on the policy you choose. At the more comprehensive end of the spectrum, some policies could reimburse you for any funds stolen through unauthorized electronic transfers. With certain providers such as Experian, this coverage could be as high as $1 million. Be aware, however, that many insurance theft insurance companies do not include this kind of coverage on their policies.
Some of the more comprehensive providers may also cover you for legal expenses you incur as a result of identity fraud. This feature could prove invaluable if you need to hire a lawyer to defend you against any criminal or civil cases that arise from the fraud.
While the recovery of stolen funds and legal expenses aren’t necessarily covered by identity theft insurance, almost all policies cover associated expenses. Although the features of your policy will vary depending on the provider you choose, many plans cover expenses such as lost wages, childcare costs, notary fees, phone bills, public record searches, and travel.
In another plus point, many insurance policies bundle their identity theft policies with other theft protection services, such as identity theft monitoring, alerts, and dark web surveillance.
The price you pay for identity theft insurance will vary depending on the provider you choose and the level of protection you choose. To give you an indication of cost, however, one of the most attractive options on the market, IdentityForce, charges between $9.99 (usual price $17.99) and $17.99 per month (usual price $23.99).
How and when insurance could help
As we all know, identity theft can be extremely expensive for victims. According to Javelin’s 2020 Identity Fraud Survey, the total cost of identity fraud stood at $16.9 billion during 2019. Without coverage in place, the financial costs resulting from identity theft could be devastating both for yourself and your business.
Furthermore, the benefits of this type of cover are not purely financial. According to an aftermath study from the Identity Theft Resource Center, 85.71% of identity theft victims feel worried, angry, or stressed as a result of the crime, while 84.1% report an issue with their sleep.
Having the reassurance of knowing your insurer is, at least partly, responsible for recovering your accounts and clearing your name can drastically reduce your levels of anxiety if you do fall victim to identity theft. Many identity theft protection services assign victims a dedicated case worker, which may prove hugely reassuring during a time of high anxiety.
For many small business owners, this feature alone could be sufficient to make identity theft insurance worthwhile.
What to look for in an identity theft insurance policy
As with any insurance policy, it’s essential to check the fine print carefully when you’re purchasing identity theft insurance. Most policies will include a deductible, which will mean you need to pay a certain amount yourself towards any losses. Almost all policies also include a maximum claim limit. For example, if your policy has a maximum payout of $50,000 and your losses are $75,000, you’ll need to cover the difference yourself.
Also, bear in mind that many insurance companies may require you to take reasonable care in the course of your business affairs, to ensure you don’t put your data (and that of your customers) at undue risk. If your insurer determines you have been negligent with your information, it may refuse to pay out in the event you need to make a claim.
Consider free alternatives
One of the most significant downsides you’re likely to encounter when considering identity theft insurance is that many of its features are available for free, or far cheaper, elsewhere.
Although the government-backed Federal Deposit Insurance Corporation (FDIC) doesn’t extend to identity theft, many banks and credit card companies offer recovery plans to reimburse victims for their financial losses. This could mean your out-of-pocket expenses as a result of the fraud may not be as significant as you first fear.
Furthermore, if you report the fraud to the Federal Trade Commision (FTC), which works with agencies such as the FBI to monitor identity theft, the organization could provide you with a free recovery plan to help you regain control of the affected accounts.
Should the worst happen, you can also contact the main credit reporting bureaus (Experian, Equifax, and TransUnion) to provide notice that you have experienced identity fraud. These bureaus can then add a free fraud alert to your file, and tell the other credit bureaus to do the same. Doing so should make it more difficult for thieves to open further accounts in your name.
As a business owner, you may also want to notify the commercial credit agencies of the incident: these are Dun & Bradstreet, Experian, and Equifax.
The credit monitoring bureaus are also legally required to permit you to freeze and unfreeze your credit, which prevents anybody including yourself from accessing your credit until you unfreeze it.
Check if you’re already covered
It’s also important to note that some of the features available on an identity theft insurance policy may be covered by your other pre-existing policies. For example, some homeowners and renters insurance policies include identity theft protection.
Even if you’re not already covered, you could investigate the option of adding this type of protection to an existing policy, which may prove cheaper than purchasing separate identity theft insurance.
You should also consider consulting your employment contract,if you have one, as a number of employers offer this type of cover as part of their benefit packages.
Like all financial purchases, the decision over whether or not you need identity theft insurance will depend on your circumstances. For many of us, the financial losses incurred by identity theft will be covered for free by other readily available services, such as free credit checks and FTC reports.
If, however, you believe that you or your business is at an especially high risk of identity theft and will experience expensive losses as a result, identity theft insurance could prove a sound investment and drastically reduce the legwork required to get things back in order.
One thing is certain: these policies have the potential to be tricky, so it’s essential you go through the fine print with a fine-tooth comb before buying coverage. You can also read more about how to report identity theft and on what to when the worst happens.