If you'd asked me in 2018 whether I was likely to be a victim of identity theft, I would have said no.
I used free credit monitoring. I had unique passwords and two-factor authentication on all my bank accounts and the email address that those accounts were linked to. I didn't keep any personal identifying information in my wallet other than my driver's license. I was tech-savvy and financially conscientious.
But after my wallet got stolen, it happened to me. It was a nightmare. And it could happen to you.
I wrote a story about my experience, along with ways to protect yourself and what to do if your identity is stolen. I also proposed some solutions that could make this crime harder to commit in the first place, and easier for victims after it does happen.
One thing I didn't write about: ID theft insurance. Before my saga, I hadn't used LifeLock or Aura or any service like that. I didn't really know what they did, or whether they would have been helpful in my situation. But after my story came out, I started getting a lot of emails from readers asking whether they should get it.
So I decided to do some digging. Here's what I learned, whether you should consider getting identity theft insurance, and whether I did.
What does identity theft protection do?
Identity theft insurance does not entirely prevent your identity from being stolen. Think of it more like AAA, said Eva Velasquez, the head of the Identity Theft Resource Center — it's there to help you after the fact, but it doesn't mean you'll never blow a tire. Here's what it does.
Services such as LifeLock monitor your credit as well as the use of your personal information. Free credit monitoring services including Credit Karma and Credit Sesame will track the three major credit bureaus (Equifax, Experian and TransUnion) for you and alert you when new inquiries and lines of credit appear. In my case, I started receiving emails when the thieves were attempting to open dozens of new store credit cards. ID theft insurance does this too. But there are more than 100 bureaus that track various types of financial activity, including checking accounts, utilities and payday loans. Identity theft protection services will monitor those as well as the three big players, and alert you whenever your personal financial information is used.
David Putnam, the head of identity for LifeLock — which is the largest and probably the best-known service of this kind, though certainly not the only one — said the company has relationships with banks, state governments, and other institutions that allow it to monitor customers' personal data beyond what free services offer. In my case, he said I would have been alerted "almost instantly" when the thieves opened checking and savings accounts at Bank of America and Wells Fargo.
So identity theft protection will monitor how your financial identity is being used in more places than just the credit bureaus, and will probably let you know faster if your identity is being used in some way. That's one piece of it.
Another piece is handling cleanup if your identity does get stolen. If I'd had ID theft insurance when my identity was stolen, that company would have handled the many frustrating phone calls, emails and reports for me.
The exact details would depend on the plan you choose, but generally speaking, you're eligible to be reimbursed for any money you lose in the process of having your identity stolen, both in lost funds and personal expenses, as well as related legal help — for instance, if you were wrongfully arrested for something your identity thief had done and needed a lawyer.
Many also offer "dark web monitoring" that will tell you when your data comes up on one of the darker corners of the Internet. At this point, everyone's information is almost certainly somewhere on the dark web, and credit monitoring services can't remove it all. But being aware of it might be a good reminder to, say, change your password for something if it came up in a leak.
How much does identity theft insurance cost?
According to a comparison from U.S. News and World Report, identity theft protection will cost you about $10 to $40 a month, depending on the plan you select. But you might already get it for free or at a discount through your employer, your credit card perks, your bank or credit union, your homeowner or renters insurance, or an organization such as AAA, Costco or AARP.
Also, if you've been a victim in a data hack — which hundreds of millions of people have at this point — you might be eligible for some form of monitoring from that.
Will it help if your identity has already been stolen?
Most identity theft insurance companies won't help you with things that happened before you had a policy with them. "For the most part the industry doesn't go backwards," Putnam said.
But your provider will help you clean up any future incidents, which are almost inevitable if you've been a victim of identity theft already. And the monitoring will help you know sooner when someone is trying to use your identity again or open another account.
Should you get identity theft protection?
Even though I'm a victim of identity theft, I don't think everyone necessarily needs to pay for identity theft insurance. Would it have helped me? Yes. But if I had frozen my credit before the thieves got their hands on my wallet, they probably would have had trouble opening any new checking accounts. Because I used free credit monitoring and acted quickly, I was able to foil them before they could take out any credit cards in my name. They still would have been able to use my driver's license, because California does not flag licenses that have been reported stolen to banks or law enforcement.
"There are really powerful ways to protect yourself for free, and you don't need to sign up for these services to have this protection," said Kimberly Palmer, a personal finance expert for NerdWallet. (Keep reading to see what those free methods are.)
If you're willing to monitor your credit closely and deal with the fallout if your identity does get stolen, then you might not need an additional insurance policy. The New York Times declared "most people shouldn't pay for identity theft protection" back in 2020.
But if you are at high risk of identity theft, you should consider it. The No. 1 risk factor: being a previous victim. People who are elderly or who have had their personal data compromised in a data breach are also at higher risk. If you're in one of those groups, evaluate your budget and your willingness to dig yourself out from under someone else's crime heap, and make your decision accordingly.
Even if you do choose to sign up, "it doesn't mean you can abdicate all responsibility" for keeping your identity safe, Velasquez said. You still need to practice good personal data hygiene, such as keeping an eye on your bank statements and using secure passwords.
How do you choose which identity theft insurance to buy?
First, double-check whether you already get it for free or at a discounted rate through your job (check with your human resources department), your insurance (call customer service), a financial institution such as your credit union or through a credit card, or as a benefit of a data breach settlement.
When you're shopping for an off-the-shelf plan, "make sure you understand what you're signing up for," Palmer said. "Providers offer different layers or tiers. Are you getting just monitoring, active alerts, meaningful recovery, what exactly will they help you with? Are you signing up for a more simple version or a higher-end version?"
In some cases, the most basic tier of plans are just credit monitoring, which you can do yourself for free. You want to make sure you're getting enhanced personal information monitoring and have access to help if your identity gets stolen.
You can review plans and price comparisons at NerdWallet, U.S. News and World Report, CNBC, and CNET.
How to prevent identity theft
There are quite a few steps you can take to protect your identity without spending any money. You can do every single one of these things and still become a victim of identity theft — but they'll go a long way toward preventing it.
What about me? Did I buy identity theft insurance?
Before I had my identity stolen, I would have said no. I didn't think I was at risk of being a victim, and figured I'd be able to sort it out myself if I was. I was wrong about the first part, and right about the second part — but it came at the expense of my sanity and countless hours of unpaid and stressful work fighting automated bank hold menus.
During open enrollment this year, I found out my company is offering a popular identity theft insurance policy at a discounted group rate. I haven't heard anything from my thieves since 2020, but people who have been victims of identity theft before are very likely to become victims again. I'm more protected now because I leave my credit frozen, but I learned through my reporting that there are a lot of holes in the system that the thieves can squeeze through.
I asked Velasquez whether it would have saved me time and stress if I'd had a policy back in 2019.
"It would have saved you an extraordinary amount of time," she said.
That's all I needed to hear. I signed up.