While virtually unheard of 10 years ago, the crime of identity theft is seems to be on everyone’s mind these day. So persuasive is this crime, that it has even given rise to a new market for the insurance industry: identity theft insurance.
 

Identity thieves work in a variety of ways to garner your basic personal information, such as social security numbers and date of birth, which enables new credit profiles. They can also access current profiles to open new credit card or banking accounts. Identity thieves can even write checks or take out loans under the stolen identities.
 

All of this can wreak havoc on your credit rating, which unless corrected could hinder your ability to take out future loans, apply for credit card. It could even hinder your ability to get a new job since many employers check your credit rating as part of your background check.
 

However, correcting your credit history can be time-consuming and expensive process.  You may have to spend hours on the phone with various credits and have to fax them several documents in order to clear up the damage your identity thieves caused.
 

Identity theft insurance is designated to cover is the cost of clearing the damage to your personal credit profile. Keep in mind that identity theft insurance will not protect you from identity theft, nor will it pay for the losses incurred by the theft. Keep in mind however, by federal law you are only liable to pay the $50 of what identity thieves charged to your account, so perhaps the most damage costs come from restoring your credit and correcting erroneous information in your credit profile.
 

Identity theft insurance will typically cover those costs, including phone calls, making copies, mailing documents, taking time off from work without pay (lost wages) and even hiring an attorney.
 

Identity theft insurance will typically cost anywhere from $25 to $65 per year. Check with the carrier to determine the limits of the policy. Some identity theft insurance policies have limits of $10,000 to $15,000.  Some carry deductibles of $10 to $500. The policy may also include limits on legal fee provision as well as the lost wages provision.
 

Before purchasing identity theft insurance, check your homeowner’s insurance policy, it may already an identity theft provision already built into it.
 

Even with identity theft insurance, financial advisers agree that the it is best to take steps to avoid identity theft in the first place.  As such, they recommend taking the following precautions: 

• Make certain to keep your social security card and driver’s license are in separate places.
  
• When pre-approved credit card offers arrive, immediately shred the ones you don’t plan to use.
  
• Use a post office mailbox instead of having mail delivered to your home.
  
• Take care when making credit card purchases online. If possible, reserve one card for this purpose.
  
• Check your credit report regularly.
  

But even after taking these steps, there is no way to ensure that you won’t become a victim of identity theft. Identity theft insurance may help protect your losses if you do become a victim.