Is Identity Theft Insurance Worth It? What Clark Howard Thinks

Millions of Americans worry about theft of their financial identity and personal data. Wayne from New York recently called The Clark Howard Podcast to ask if identity theft insurance is worth it. He’s paying $75 a year for a policy advertising up to $1 million of zero-deductible identity theft insurance coverage. The program monitors his email, Social Security number, phone, driver’s license, passport, medical, bank, and credit cards.

“People buy them, and then they feel like they have peace of mind,” Howard said. “But I’ve never found the supposed coverages — that sound impressive — to actually be worth it.”

Howard said the programs can offer a false sense of security that keeps people from doing the free work that actually prevents loss, while criminals increasingly target the accounts these policies quietly exclude. Insurance contracts pay only for what they specifically name.

“If they don’t say they cover losses from theft from brokerage accounts and bank accounts, they don’t cover losses from brokerage and bank accounts,” Howard said. Wayne’s policy listed unauthorized electronic fund transfers, lost wages, private investigator costs, legal defense fees. Notice what is missing: direct reimbursement for stolen investment balances.

Free federal protections are often stronger than the insurance policies. Regulation E caps consumer liability on unauthorized electronic bank transfers at $50 if reported within two business days. Credit card fraud liability is capped at $50 by the Fair Credit Billing Act, and every major issuer zeroes that out in practice.

Brokerage accounts are more exposed. SIPC covers broker failure, not theft from your account by someone with your credentials. Most major brokers offer asset protection guarantees, but those typically require prompt reporting of unauthorized activity and proof you did not share credentials or fall for phishing. “Speed in detecting a theft seems to be the key determinant to getting your money back from one of your investment or retirement accounts,” Howard said.

Identity theft insurance makes sense in narrow cases: someone with a complex identity recovery already in progress, or a policy bundled into a homeowners rider at near-zero marginal cost that includes genuine restoration services. The restoration labor is the only part that sometimes pays for itself.

How You Can Protect Yourself

1. Freeze your credit at all three bureaus. Howard called this the easiest low-hanging fruit and noted it doesn’t affect any of the credit you already have. It protects you in most cases from somebody pretending to be you, applying for credit as if they’re you. Equifax, Experian, and TransUnion all offer free freezes online.
2. Put brokerage and retirement accounts on a weekly check schedule. Log in, scan recent transactions, verify linked bank accounts have not changed. Set a recurring calendar reminder.
3. Turn on every available alert. Withdrawal alerts, login alerts, address-change alerts, and linked-account-change alerts at your broker and bank cost nothing and detect intrusions in hours instead of weeks.
4. Use a hardware security key or authenticator app for brokerage logins, not SMS, which is vulnerable to SIM swap scams.