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Should Homeowners Insurance Cover Cyber Fraud?

Anum Yoon
3 min read
Should Homeowners Insurance Cover Cyber Fraud?

Millions of Americans access the internet on a regular basis for work and recreation. It has a diverse range of applications, assisting with communication, management, and the acquisition of information, among other functions. Its convenience is incredible, but sometimes that convenience comes at a cost.

Though the value of the internet for commerce and entertainment is indisputable, it also serves as a tool for opportunistic cybercriminals. Anonymity allows for concealment, making it far easier to collect information and defraud victims. Hackers can hide behind a screen, reducing the risk of penalties.

Types of Cyber Fraud

You’re likely aware of at least one or two methods of cyber fraud. For instance, phishing is a technique where a cybercriminal sends an email attempting to gain the personal information of the recipient, taking on the appearance of a legitimate company. And the list goes on—many, many more methods exist.

With malware, scareware, ransomware, and the various other techniques that cybercriminals employ, internet users want to protect themselves and their families. Naturally, the frequency of these crimes raises the question of insurance and whether existing policies should include cyber fraud in their coverage.

Whether you’ve fallen victim to cyber fraud in the past or you want to take precautions to prevent it, the appeal of extended coverage is clear. Let’s explore the subject in greater detail, looking at the necessity of cyber insurance for internet users in an increasingly connected world.

fishing hook pierced through credit card with blurred keyboard in background implying phishing scam

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The Extent of the Problem

According to the Insurance Information Institute, more than four out of five people with connected devices either lack coverage for cybercrime or don’t know if they have coverage. This alarming statistic speaks to the necessity of insurance, especially with the rate at which cybercrime occurs on a daily basis.

As context, the FBI reported that victim losses exceeded $1.4 billion in 2017. Credit card fraud claimed more than $57 million, while identity theft claimed more than $66 million. These numbers are only a partial representation of the damage caused by cybercriminals seeking out susceptible internet users for their personal gain.

Beyond fraud, vulnerabilities in your system can cause additional problems. With the increasing popularity of smart home products, improved security is an important precaution, protecting you against hackers who take advantage of these devices. Clearly, the issue is more pressing than ever.

Promising Solutions

Since cybercrime is on the rise, companies now offer an optional endorsement to their homeowners policy that provides relevant coverage. In acknowledgment of their customers’ vulnerabilities, some organizations also offer resources to facilitate recovery, assisting a victim as they return to their normal lives.

As the value of these optional endorsements continues to grow, customers may show interest in their eventual integration. At the moment, most homeowners insurance doesn’t include coverage for cyber fraud, but that might change. With the current rate of cybercrime, extra coverage makes sense.

Cyber insurance already exists, of course, but it isn’t as common as other forms of insurance. You may know it as “Personal Cyber Risk Insurance,” “Internet Crime Insurance,” “Personal Cyber Insurance,” or “Cyber Protection Insurance.” Regardless of the name, it usually covers the same basic elements.

Concerning the cost of cyber insurance, it differs depending on the extent of the coverage and how you purchase it. In certain rare instances, it’s already a part of an existing policy. That said, you’ll likely have to seek it out as an optional endorsement if you’re hoping to add it to your homeowners insurance.

keyboard with finger pressing cybercrime prevention key where enter would normally be

Related: There’s a 90% Chance You Have the Wrong Insurance Policy

Speculations on the Future

As mentioned earlier, the value of optional endorsements for cybercrime will only continue to grow. With the country’s dependence on technology and the dangers of cyber fraud, those who access the internet on a regular basis will have to take preventive measures to protect themselves.

In this regard, insurance is indispensable. It’s safe to speculate that insurance companies will see greater demand for cyber insurance and endorsements for cyber fraud. As cybercriminals improve and expand upon their methods for defrauding internet users, an additional line of defense will prove critical.

You should look into your options and research companies that can provide the insurance you need. Whether you’re familiar only with phishing or you’re well-versed in the methods cybercriminals like to employ, you’ll likely see the appeal in an endorsement.

Securing Your Safety

Moving forward, set aside time to speak with a representative from your insurance company. Ask if your current homeowners policy includes coverage for cybercrime. Most standard companies don’t include it, and some companies don’t even provide cyber coverage as a part of their insurance offerings.

If you think you’d benefit from cyber coverage but it’s presently unavailable from your current company, consider making a switch when your policy is up for renewal. Given the benefits of this type of coverage and the risks of cybercrime, it’s a necessary precaution for any internet user.


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Have you or has anyone you know fallen victim to cybercrime? Are you aware if your insurance policy includes cyber coverage?

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.