Nearly everyone you talk to has either been a victim of identity theft themselves, or knows someone who has. It’s the stuff nightmares are made of. Of course, insurance companies would be the last to tell you there’s no monster under your bed. But they will do what you’d expect them to do — they’ll sell you an id theft insurance policy.

It’s hard to pin down the exact number of identity theft victims in the United States. The US Department of Justice says id theft is now the number one crime in the nation, and 1 in 4 households has been affected. Gartner, Inc., an information technology research company, puts the figure at 15 million individuals. With statistics like that, it’s no surprise there’s a booming market for identity theft insurance.

What does an ID theft policy provide? 
Policies vary wildly. In December, 2006, a personal finance columnist for MarketWatch, a subsidiary of Dow Jones, featured identity theft insurance in a column,”A Stupid Investment of the Week” the article cited policies with limited coverage. In fact the policies cited didn’t offer much other than reimbursement for things like long distance phone charges, certified mail expenses, or notaries’ fees accrued while the policyholder tried to clean up the mess. Lawyers’ fees were only covered with prior consent from the insurance company.

However other policies will cover up to $30,000 in lost bank accounts, and reimburse last wages up to $500 a week for up to a month. Some policies cover lawyer fees, and others provide legal counseling or will actually do the hard work of contacting the credit reporting agencies to place fraud alerts and restore your credit.

Before you decide 
If you’re considering purchasing an id theft insurance policy the first place to check is your homeowner’s insurance. Some policies include identity theft. Check, too, with your credit card providers, and your bank or credit union.

The take home message: Shop wisely. Premiums typically run from $25 to $150 a year, so even with a very limited policy, you’re not going to be out much. But if you’re not careful, you might not get much either.