ID theft cover: Do you really need it?


ID theft cover and its close relative, credit card insurance, are fairly new to the insurance sector and were created to help people recover financially when a credit card or other identity information is stolen. Cover usually includes credit monitoring and for residual debts and charges incurred as a result of the theft. But there are some factors that will exclude you from coverage by this type of insurance. For example, if your credit card is stolen by a relative, you may not be covered.


As for advantages, it often covers legal costs necessary in clearing up damaged caused by identity theft. Some policies may cover lost wages or salary, though they usually only pay out a small percentage of these. ID theft and credit card insurance policies may cover emergency cash, lost keys, luggage retrieval on holiday, and replacement tickets. The cost of such a policy is £15 to £20 per year.

By law, however, you are already covered for many of these issues by your bank, credit card issuer or UK statutes. You can check your own credit reports for only £2 per credit agency, and under the Banking Conduct of Business rules and Lending Codes, you are limited to £50 liability as long as you haven't been grossly negligent or fraudulent. HSBC, Barclays, Nationwide Building Society, and Lloyds TSB limit your liability to just £50 if you lose your card and your PIN is used as long as you were not excessively negligent.

ID theft and credit card insurance policies are also quite restrictive when it comes to replacing lost cash when cash cover is part of the policy. Your cash may only be covered if it is stolen along with your credit card when you're abroad. Some policies only pay if you have original documentation proving you had the cash right before the theft. This would limit payouts to those rare occasions when you withdraw cash, keep the cashpoint receipt, and immediately have your cash and credit card stolen.

The conclusion by most financial experts is that the typical credit card user doesn't need to purchase ID theft or credit card insurance, due to already robust protections in the law.

Published: 22 October 2010