These days, it seems like consumers can buy insurance coverage for just about everything. Buying a child a new toy? They’re offered a protection plan in case it breaks. Bringing home a new dog? Pet insurance helps them pay for Fido’s veterinary care. And of course, who can forget that everyone is required to have health insurance, or face hefty tax penalties?

Benefits administrators have a responsibility to explain to employees all of the different options available through work, yet many aren’t really familiar with all of the options themselves. As a result, many employees decline certain options, such as identity theft insurance, not realizing that for a small investment, they can protect themselves should their personal information falls into the wrong hands.

Given that major data breaches occur with alarming regularity, no one is safe from identity theft — not even children, and since the average case of identity theft costs victims anywhere from $1,000 to $10,000, it’s important for HR teams to show that paying a small amount for coverage today can protect them from larger losses in the future. Therefore, it’s worthwhile for companies to offer identity theft insurance to employees, and even more important for benefits administrators to properly explain how identity theft insurance works, what it covers, and why it’s important to have.

Identity Theft Insurance: An Overview

When explaining identity theft coverage to employees, it’s helpful to put the issue into a context they can relate to. For example, consider this scenario: An employee’s personal information is leaked in a data breach. Because of the insidious nature of the attack, the leak isn’t discovered for several weeks, during which time the thieves begin systematically stealing small amounts from his or her bank account. At first, the theft is barely noticeable, just testing to see if the cards work. Then they strike, making a large purchase and maxing out the cards — and also applying for three new store cards.

The employee then has to spend hours on the phone with credit card companies, law enforcement agencies, and the credit bureaus. Collecting the paperwork necessary to prove that you’re a victim of identity theft requires time off from work. And that paperwork? It doesn’t come free. There are fees for affidavits, notary services, and overnight mail. All told? In addition to monetary losses can lead to thousands of dollars in costs — not to mention, lost productivity for the employer.

With identity theft insurance, those losses are minimal. It’s important to explain that the coverage does not cover direct losses, because most banks and credit card issuers have zero or low liability policies in place that will reimburse customers for the theft. Instead, identity theft insurance covers expenses related to stopping the theft and restoring the policyholder’s identity and credit, including:

•          Charges for credit reports and other documents related to the theft.
•          Phone calls related to the theft.
•          Lost wages, if he or she has to take unpaid time off from work to deal with the problem.
•          Legal fees, within the policy limits (Legal expenses often require pre-approval from the insurer).
•          Ancillary expenses, such as child care, parking, etc. when he or she needs to visit offices in person.
•          Other fees not covered by the bank or credit card issuer.

In short, identity theft insurance prevents employees from experiencing significant non-reimbursable costs out of-pocket costs resulting from the theft of personal information. In addition, some insurance plans also connect victims with a case manager or advocate who can help guide them through the process of restoring their identity, which is especially helpful in cases involving Social Security numbers, which can be used to open new accounts, take out loans, or make major purchases, such as cars.

This is a significant benefit to employers as well. Instead of using work time or taking time away from the office to deal with the problem, the case manager does most of the legwork, allowing the employee to maintain productivity.

A Few Important Points

As with any type of insurance coverage, there are significant differences in policies in terms of costs, deductibles, and limits. A basic policy, for example, may only cost a few dollars a month and offer $10,000 worth of coverage, while others offer up to $1 million in coverage. Often, such coverage is included with identity monitoring services, which will keep a close eye on personal information and notify the member of suspicious activity to help stop identity theft before it starts. Many employers are helping to keep the costs low by subsidizing the cost of identity protection for employees, or offering it as a standard benefit.

Highlighting the benefits of identity theft coverage, and the small investment compared to the potential significant losses, will help employees see the value in identity theft insurance. Even though relatively few victims of identity theft actually need to make claims on identity theft insurance, it still provides peace of mind, and shows employees that you value their time and money. 

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