Identity Theft Insurance: What It Covers and What It Does Not

Identity theft insurance is a policy that pays for the cost of cleaning up after a theft. It is not a shield, and it usually does not give your stolen money back.

By Siddharth ShankarUpdated October 19, 2026

The words insurance and protection are used loosely in this market. Before you pay for anything, it helps to know what an identity theft insurance policy actually promises.

What identity theft insurance covers

An Equifax guide to identity theft insurance says these policies aim to reimburse the costs of recovery, such as:

• Case managers or identity restoration specialists
• Legal fees, including lawyers and court hearings
• Replacing documents such as a driver’s licence or Social Security card
• Wages you lose because of the theft
• The cost of placing fraud alerts on credit reports
• Bank or lender fees caused by fraudulent activity

Note that Equifax also sells identity protection products, so read the description as one seller’s view, and compare it with other sources.

What it usually does not cover

The same guide says policies typically do not cover stolen money or direct financial losses, such as fraudulent purchases or unauthorised use of credit. Those losses are mostly handled by your bank or card issuer. The guide notes that federal law separately limits your liability for unauthorised credit card use to $50.

Typical limits and cost

• Coverage limits: usually about $10,000 to $15,000.
• Premiums: typically $25 to $60 per year.
• Deductibles: some policies require you to pay an amount before reimbursement.

Insurance, monitoring and protection are different

Insurance pays for recovery costs after a theft. Credit monitoring watches your credit report for changes such as new accounts and hard inquiries, and alerts you so you can act fast. Identity theft protection services add monitoring for the sale or misuse of your information, and may include insurance. For a deeper look at these bundles, read is identity theft protection worth it.

Check what you already have

Questions to ask before you buy

• Is the limit per incident or per year?
• Which costs are covered: lawyers, lost wages, document replacement, restoration services?
• Are there exclusions for business accounts or for thefts that began before you bought the policy?
• Is there a waiting period or a deductible?
• Who is the insurer, and who handles the claim?
• Do I have to enrol in a monitoring service to get the cover?

Signs of a poor deal

Be careful if the policy is bundled into an expensive monitoring package you do not want, if the description is vague about what is excluded, or if marketing focuses on fear instead of terms. A short, plain policy with clear limits is usually better than a long list of features.

When it might make sense

Insurance can be worthwhile if the price is low and you worry about the cost of lawyers or lost time. It should never replace prevention. If you have already been affected, read what to do if your identity is stolen, and to cut your risk, see how to prevent identity theft.