General & Any Policy
Is Identity Theft Insurance Worth It?
Cost data from NerdWallet, cross-confirmed against State Farm's published Identity Restoration endorsement price; coverage-limit range from III.
It does not stop identity theft from happening. What it does is reimburse the real cost of cleaning it up, and it is one of the cheapest add-ons on this whole site.
Data sourced from NerdWallet, State Farm
What it does not do, first
The single biggest misunderstanding about identity theft insurance is thinking it prevents identity theft or alerts you when your information is compromised. It does not. That is the job of a separate credit monitoring service, which actively watches your credit reports and flags suspicious activity.
Identity theft insurance is purely reactive: it reimburses the real costs of cleaning up an identity theft that has already happened.
What it actually pays for, and how much it costs
As an add-on endorsement to an existing homeowners or renters policy, identity theft insurance typically costs $20 to $60 a year, according to NerdWallet. State Farm's own Identity Restoration endorsement is priced at exactly $25 a year, landing right inside that range and giving a concrete, real-world number to anchor the estimate to.
For that small premium, the coverage generally reimburses the practical costs of fixing an identity theft: lost wages from time taken off work to deal with it, legal fees if the situation requires them, notarization and mailing costs for disputing fraudulent accounts, and in some cases funds already stolen, up to the policy's coverage limit.
A common add-on endorsement caps out around $50,000. The broader market, standalone or bundled monitoring-service plans rather than a simple homeowners add-on, ranges far wider, from about $10,000 up to $1,000,000 in coverage, roughly a 100x spread depending on the specific plan and provider.
To see what adding this coverage would look like for your own policy, the identity theft insurance value calculator walks through the cost against the coverage it provides.
Making the actual decision
Because the add-on version is inexpensive, often close to $25 a year, this is a smaller decision than it might feel like, closer to choosing a minor policy add-on than making a standalone insurance purchase.
If it is available cheaply on a policy you already carry, the math tends to favor adding it. A standalone monitoring-service plan with a much higher coverage limit is a separate, bigger decision, worth weighing against any free credit-monitoring benefits your bank, credit card issuer, or employer may already provide, since those sometimes cover the monitoring half of the equation at no added cost.
Frequently asked questions
How much does identity theft insurance cost?
As an add-on to an existing homeowners or renters policy, typically $20 to $60 a year, according to NerdWallet. State Farm's own Identity Restoration endorsement is priced at exactly $25/year, sitting right in the middle of that range, which cross-confirms the NerdWallet figure with a specific real-world quote.
What does identity theft insurance actually pay for?
It generally reimburses expenses tied to fixing the identity theft itself, lost wages from time taken off work to resolve it, legal fees, notarization and mailing costs, and sometimes funds already stolen, up to the policy's coverage limit.
A common add-on endorsement limit is around $50,000, though the broader market for standalone or bundled monitoring-service plans ranges much wider, from about $10,000 up to $1,000,000 in coverage, roughly a 100x spread depending on the specific plan.
Does identity theft insurance prevent identity theft from happening?
No, and this is the most common misunderstanding about the product. It does not monitor your credit or alert you to suspicious activity, that is what a separate credit monitoring service does. Identity theft insurance only reimburses the cost of cleaning up an identity theft that has already happened.
Is identity theft insurance worth buying?
Given how inexpensive the add-on version is, often around $25 a year, the math tends to favor buying it if it is available as a cheap endorsement on a policy you already have.
It is a smaller decision than it might sound, closer in cost to a minor policy add-on than a standalone insurance purchase. A standalone monitoring-service plan with a much higher coverage limit is a bigger, separate decision worth weighing against free credit-monitoring options your bank or credit card issuer may already offer.