Homeowner's Insurance and Identity Theft

Homeowner's insurance does not cover identity theft until you add coverage, an endorsement or rider to your policy.

According to the Federal Trade Commission (FTC), nearly nine million Americans fall prey to identity theft each year. The average victim must spend $1,200 and 175 hours to undo the damage. The FTC promotes a program called "Deter. Detect. Defend." You must deter and detect, but you can use your homeowner's insurance to defend.

Identify theft homeowner's insurance can help if your identity is stolen by reimbursing you for costs you incur repairing the damage. Costs can include long distance telephone bills, mailing costs, pre-approved legal fees and lost wages. Most policies, however, do not cover against financial loss and only reimburse you for money you have already spent.

At $25 to $99, identity theft homeowner's insurance is not particularly expensive. Each policy varies by company. Read the exclusions to understand precisely what the policy will cover.

What do identity theft homeowner's insurance policies usually cover?

Reimbursable expenses: Policies will routinely cover expenses to repair the damage to your credit if your identity is stolen. It will reimburse for reapplication fees for denied loans, credit report fees, notary fees, document replacement costs, mailing costs and long distance telephone calls to credit bureaus, financial institutions and credit bureaus.

Attorneys fees: When it becomes necessary to hire an attorney, most policies require the legal fees to be pre-approved and provided by a contracted attorney. Know in advance if your policy covers attorney's fees. Some policies will not cover an attorney.

Lost wages: To recover from identity theft takes time. The agencies and companies you will contact will likely need to speak to you when you would normally be at work. Employers do not pay for you to take care of personal business. When possible, get a identity theft homeowner's insurance policy which will reimburse you for lost wages.

What does identity theft homeowner's insurance not cover?

Financial loss: Insurance companies expect the financial institutions and credit card companies to recover the financial losses when identity thieves incur fraudulent charges.

Late and over limit fees: Credit card companies are expected to remove these fees when presented with evidence of identity theft.

NSF charges: Banks are expected to remove non-sufficient funds charges from accounts which have been fraudulently opened or emptied.

Upfront expenses: You have to pay and provide receipts for your expenses without reimbursement until after your deductible is met. Insurance will not pay upfront for expenses.

What do I need to know?

Deductible: Choose a low deductible. The FTC reports in the majority of cases individuals spend less than $500 in covered expenses. Make sure the deductible is low.

Coverage: Find out what you will need to restore your credit. Make sure you have enough coverage for your expenses.

Overlap: Find out what losses are not covered. Your credit card provider and bank have coverages for certain thefts. You will not be reimbursed for your expenses if their insurance overs the loss.

Do I need identity theft homeowner's insurance?

While everyone is a potential identity theft victim, some are at higher risk. Those who make more than $150,000 per year, who make less than $15,000 and between 18 and 29 suffer the greatest losses from identity theft and are at the greatest risk.

High income earners have and use more credit, giving more opportunities to identity thieves. Low income earners are not able to afford to repair their credit, which prolongs the financial suffering. College students and young adults are least likely to take appropriate measures to protect their identities, such as shredding personal information and maintaining adequate online safeguards to protect their identities.

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What do I need to know about homeowners insurance?

Homeowner's insurance is a necessity and mandatory for most homeowners. It will automatically cover the home against fire, theft and most natural disasters, but there are important exceptions. Choose the correct coverage for homeowner's insurance to protect your largest investment.

Dwelling: Covering your actual home is the basic protection of homeowner's insurance. To adequately cover your dwelling, experts suggest a minimum of 125% of the cost of your home. Although your home may be worth $100,000, to rebuild it in the event of a fire is likely to cost more. This disparity is called "replacement cost".

Outbuildings: Do you have a detached garage or workshop? Unless specifically covered, homeowner's insurance does not consider outbuildings part of your dwelling. Without an outbuilding rider, an exception or addition to your policy, these buildings and their contents will not be covered even if the dwelling is.

Personal Property: The rider for personal property is also called "content" insurance because it covers your personal belongings inside the insured home. While this covers furniture, clothing, sundries and household goods (like cookware), limitations apply which require additional riders. Computers, electronics, art, jewelry and home office equipment will have a coverage limit.

Liability and Family Liability: If someone else is hurt or their property lost or damaged because of a covered event, this homeowner's insurance feature covers the expenses you would legally be obligated to pay. You have a house fire, and the neighbor's car is damaged by the fire. This coverage will replace your neighbor's car, if you have sufficient coverage. It will not cover auto accidents.

Personal Medical: When someone has an accident on your property, you are liable for their medical expenses. Homeowner's insurance covers a portion of those expenses. Be certain to have enough personal medical coverage to pay for common accidents, like trips and falls. It does not cover medical expenses arising from an auto accident.

While the coverages above are standards choices when choosing homeowner's insurance, the following are not. These coverages are in addition to your policy.

Extended personal property: These riders will cover your belongings when you own more than the standard coverage amount. Consider buying additional coverage if you have an extended art collection, expensive jewelry, home theater system, designer kitchen, several computer systems or memorabilia collections, which cannot be replaced with the standard personal property coverage.

Business riders: Do you have a home office? Homeowner's insurance does not cover home offices without a rider. Protect your computer, fax machine and office equipment and supplies.

Portable electronics: This homeowner's insurance rider is offered by some insurers to cover items like cell phones, portable fax machines and laptop computers which you will take away from your home.

Identity theft: Identity theft threatens your ability to pay for your home. Homeowner's insurance companies recognize this. Identity theft protection covers losses through credit card fraud, unauthorized loans and other forms of identity theft.

Flood insurance: Floods are not covered by homeowner's insurance. Homes in flood plains often are not eligible for this rider. Homes off a flood plain are normally eligible against flash floods, water damage from broken public water sources and other floods. Check with your local zoning office and insurer to see if you qualify for flood insurance.

Once you've chosen coverage, get the correct deductible for your policy. You will have to spend the deductible amount if you have a claim. Choose a deductible you will be able to pay out of pocket.

Do shop around for rates. Companies vary on reputation, coverages, rates and exlusions. Read the policy before you sign to know exactly what is covered by your homeowner's insurance and what is not.

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