5 On Your Side

Buying ID theft insurance? Read the fine print

Posted 9:49 a.m. Thursday

Big data breaches have made headlines recently and exposed millions of retail customers to potential identity theft, but inexpensive insurance can mitigate that risk.

Identity theft cost customers $15 billion in 2015, and every swipe of a debit or credit card creates risk. For $25 to $50 a year, some reputable companies offer coverage, but it might not be worth the money.

Insurance companies Allstate, Liberty Mutual and State Farm offer identity insurance as an add-on to home or rental insurance. In most cases, the policies will reimburse victims for up to $25,000 of losses.

"That sounds pretty good, but most banks and credit card companies already cover you for losses due to fraud, and most victims actually suffer very little or no out-of-pocket losses," said Consumer Reports' Money Editor Lauren Lyons Cole.

The aftermarket insurance typically includes help dealing with the time-consuming aftermath of identity theft, such as covering out-of-pocket expenses or supplying a case manager to make calls on a victim's behalf.

"This insurance isn't designed to alert you to identity theft," Lyons Cole said. "That's what identity protection services do. It's really there for what happens after you've been compromised."

Consumer Reports says taking matters into your own hands, such as freezing credit reports and signing up for free online apps to monitor checking and credit accounts, can be more effective and cheaper.

If you do opt to purchase insurance, Consumer Reports says make sure you look closely at what it actually covers.

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