What is an Identity Fraud Reimbursement Program?

An identity fraud reimbursement program is an insurance-like product that reimburses the holder for expenses related to dealing with being a victim of identity theft.

How Does an Identity Fraud Reimbursement Program Work?

Let's say John Doe happens to see some paperwork on a coworker's desk. The paperwork is a stack of applications for credit from customers. The applications list each person's name, birth date, social security number and bank information. John Doe photocopies an application for Jane Smith. He then uses Jane's information to apply for a credit card in her name, which he then uses to buy a motorcycle and a beer stein collection.

Jane is a responsible adult and therefore checks her credit once every four months (once a year for each of the three credit bureaus). She notices the 'new' credit card and the massive balance for the motorcycle and beer-stein spree. She calls the credit card company to dispute the charges and files a police report. In the meantime, she is unable to qualify for a mortgage because lenders feel she is carrying too much debt (thanks to the thief), and collection agencies are calling her for credit card payments.

Jane has to hire a lawyer, spend hours filling out paperwork, and spend money on registered mail, travel to IRS offices, and going to court. Thankfully, her identity fraud reimbursement program covers many of these expenses.

Why Does an Identity Fraud Reimbursement Program Matter?

Virtually anybody can buy an identity fraud reimbursement program. Sometimes, these programs are offered as employer benefits or as part of a homeowners insurance policy.