What Does Identity Theft Insurance Cover in Canada?

If you've ever received a notice of a data breach or spotted an unfamiliar transaction on your credit report, you know how unsettling identity theft can feel. It’s not just the financial stress that follows, but also the emotional toll and time it takes to resolve the damage. Identity theft insurance is designed to help ease this burden. But it’s important to understand exactly what it covers, and what it doesn’t, before you rely on it.

Identity theft insurance does not prevent fraud. Instead, it supports your recovery if someone steals your personal information and uses it without permission. This type of coverage can be especially helpful if your identity is compromised in a major breach, your wallet is stolen, or if your online accounts are hacked and misused.

What Is Typically Covered

Most identity theft insurance policies in Canada offer reimbursement and support services related to the recovery process, not the actual fraudulent charges, which are usually handled by banks or credit card companies. Here is a breakdown of common features and how they typically work.

Coverage Area	What’s Included
Legal fees	Costs for hiring a lawyer to help restore your identity or defend against misuse
Lost wages	Reimbursement for time off work taken to resolve identity issues
Notarization and document costs	Fees for notarizing affidavits, mailing certified letters, and replacing ID
Phone and postage expenses	Charges for phone calls, faxes, and postage related to resolving the incident
Credit monitoring	Alerts for new credit inquiries or changes to your credit profile
Identity restoration assistance	Access to specialists who guide you through recovery steps
Child identity theft coverage	Support for fraud committed using a child’s Social Insurance Number or identity

In most cases, coverage is limited by a maximum dollar amount per year or per event.

Tip: Some home or renters insurance policies include identity theft insurance as an add-on. Check your current policies before purchasing separate coverage.

What Is Usually Not Covered

Identity theft insurance focuses on reimbursing recovery costs, but it has important limits. It does not usually cover:

Direct financial losses
Fraudulent charges to your bank or credit card are typically the responsibility of the financial institution, not the insurer.
Business-related identity theft
If someone misuses your identity to commit fraud through your business, most personal policies will not apply.
Consequential losses
Costs like emotional distress, lost opportunities, or the long-term impact on your credit score are usually not included.
Stolen funds from phishing scams
If you voluntarily gave out sensitive information (like sending money to a scammer), it may not be covered unless the loss relates directly to identity misuse.

Note: Read the definitions section of any policy carefully. Many exclusions are hidden in the fine print and could surprise you during a claim.

How Identity Theft Insurance Works in Practice

This type of insurance is more about support than reimbursement for stolen money. Once you file a claim, you may be assigned a case manager or identity restoration specialist who will help you manage the process. Reimbursements typically require documentation such as receipts, police reports, or affidavits.

Claims must be submitted within a specific timeframe
Most policies require you to report the theft and begin your claim within a certain number of days after discovery.
Proof of expenses is essential
You’ll need to keep detailed records of every cost — including time off work, postage, and legal fees — to qualify for reimbursement.
Payouts are capped
Even if your identity theft costs exceed the coverage limit, you will only be reimbursed up to the maximum allowed under your policy.

Caution: Before relying on identity theft insurance, ask your insurer what documentation is required and how quickly you must act after noticing suspicious activity.

Why Understanding the Coverage Matters