Identity theft occurs when a thief steals a consumer's personal financial information and uses it to make purchases on credit, obtain employment or commit a crime.

The new insurance policies are gaining popularity following scandals such as that involving financial data warehouse ChoicePoint Inc. The Atlanta-based company recently acknowledged scamsters stole the Social Security numbers and other personal information of 145,000 people, including nearly 1,000 in Utah.

But are the policies, which typically cost between $25 and $250 a year and provide $15,000 to $25,000 worth of coverage, a good choice for consumers worried about protecting their good credit?

"We're fairly concerned that in some cases they are pretty useless products," said Kerry Smith, senior consumer attorney with the National Association of State Public Interest Research Groups.

Policies often compensate victims for costs incurred while trying to clear their names, including attorney fees and wages lost while contacting creditors and law-enforcement agencies. But many people have few out-of-pocket costs or no lost wages when trying to recover from identity theft. Rather, they spend hundreds of hours of their own time before or after work laboring to clear their identities.

"You need to look very carefully at the policy," Smith said. "Most aren't going to reimburse you for your time."

Allstate's new coverage, which costs $30 annually and is available to homeowners and renters insurance policyholders, addresses concerns of consumer advocates such as Smith.

Victims with policies, for example, can elect to have a company affiliated with Allstate handle the details of restoring their identities.

Those that want to handle the process themselves can do so, with reimbursement of eligible expenses such as attorney fees, loan reapplication fees, credit report fees and lost wages of up to $25,000.

Allstate product specialist Lorre McGee estimates the identity theft victims often spend about 30 hours trying to restore their credit after their identity has been stolen.

Since Allstate began offering identity theft coverage last month, about 170 people in Utah have signed up for the coverage.

Other providers also report interest in their offerings.

"Identity theft coverage is something people really want," said Olivia Riley, Washington Mutual spokeswoman.

The Seattle-based banking company offers customers a free policy with limited benefits and a more elaborate plan for $10 per month that provides coverage for a number of expenses up to $15,000 and pairs victims with counselors who help restore their identity.

Policy know-how

1. Does the coverage provide access to specialists who help victims restore their identities or is assistance provided by counselors who provide advice to victims who are doing the work themselves?

2. Does the policy cover some of the out-of-pocket costs victims incur while trying to repair their credit?

3. What type of out-of-pocket costs are eligible for reimbursement?

4. What are the limits of the policy? Most policies offer $15,000 to $25,000 worth of coverage.