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Insurance coverage for ID theft

/ Source: CNBC

Anyone who has had their identity stolen can tell you, it can be so easy for criminals to get the numbers they need to do real damage. Credit cards, drivers licenses, computers — that’s all it takes. Yet cleaning up the problem and reclaiming your identity can take a lot more time and money. Now, major insurance companies are trying to ease that burden.

VALERIE BROWN didn’t realize her identity had been stolen until she applied for a mortgage. She got a copy of her credit report and discovered fraudlent accounts had been opened using her good name.

“This is not mine,” she said recently, reviewing her credit report. “This does not belong to me.”

Last year, more than 160,000 people notified the Federal Trade Commission that they’d been victims of identity theft ... making it one of the fastest growing crimes in the country.

It’s also one of the few crimes where victims not only have to prove they’ve been harmed, they are also responsible for reclaiming their stolen identity.

“During that time that you’re cleaning up the mess — that is going to take anywhere between 6 months and two years — you don’t have credit,” said Jay Foley, of the Identity Theft Resource Center in San Diego. “You don’t have a lot of the normal things that you have. Plus the fact that you’ll be taking time off from work, and you’ll be out money there.”

Identifty theft insurance is coming to the rescue. It’s a relatively new niche in the insurance industry; it doesn’t acutally cover any losses you may incur — that’s between you and your credit card company. What it does cover is the time and money it takes you to wade though the logisitcal and legal paperwork.

“It’s for things like lost wages,” said Jeanne Salvatore, a spokeswoman for the Insurance Information Institute.

“It may be for things like going to a notary; for Federal Express or other types of packaging if you need to overnight information. Those types of expenses are generally going to be covered... Also in some instances, you may also be reimbursed for legal expenses,” she said.

Chubb Group covers all of these identity theft expenses up to $25,000 — at no extra charge — through its homeowners or renters insurance. Policies are now available in 47 states; unfortunately, many Chubb clients have needed it.

“Everyone’s time is extremely valuable whether they’re rich, poor, have 25 credit cards just one or none at all,” said Mary Ann Avnet, a marketing manager at Chubb Group. “Anyone can be a victim. And there’s piece of mind: if you have to go through the effort at least there is some economic reimbursement.”

Some insurance companies, like Travelers, offer identity theft insurance as a stand alone policy. At Travelers, the cost ranges from $59 to $180 a year.

Some credit card customers may also be covered. Last month, Visa USA announced it will provide member banks with ID theft insurance as an optional benefit for cardholders. The policy will cover up to $15,000 in losses.

Microsoft employees, as well as workers at Wachovia and some 500 other companies, can opt for coverage under a legal insurance policy offered by the Arag Group. The employee pays an average premium of $16 a month, which is deducted from their pay. (MSNBC.COM is a joint venture of Microsoft and NBC.)

“We’ve got a call center that we have 25 customer service reps who will work with individuals from the very day all the way through completion and stay with that person and help them understand what the process is,” said James E. Kraynik, Arag’s vice president of product development.

Yet identity theft insurance isn’t a cure all. It may help clean up the mess, but it can’t protect victims like Valerie Brown from having their identity stolen in the first place.

If you’re shopping around for an identity theft insurance policy, you need to ask a few important questions. You’ll want to find out:

How much it’ll cost;

What expenses will be covered;

and whether you’re already covered somewhere else, like your homeowners policy.