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The FTC says that 9.3 million people are the victims of identity theft every year.
Many people purchase identity theft insurance with the hope that they will have peace of mind knowing that someone else is protecting their identity.
Before you purchase identity theft insurance, there are a few things you should know first.
For starters, some financial institutions provide identity theft insurance for FREE. Plus, there are other ways to protect yourself from identity theft without having to pay a thing!
Before You Buy Identity Theft Insurance
Here are the things you need to consider before purchasing identity theft insurance:
#1 Most identity theft insurance does not monitor all 3 credit bureaus, but rather one or two. So, if you do decide to purchase identity theft insurance, you should make sure that the institution offering the insurance monitors all 3 credit bureaus. This applies to not just the first time, but continually.
#2 Identity theft does not cover any loss of money that results from having your identity stolen. So, if someone takes out a loan in your name and then runs with the money, your identity theft insurance will not cover that loss. All identity theft insurance covers are the costs associated with the actions you have to take to rectify having your identity stolen — like the cost for copies, making phone calls and in some rare cases legal bills.
#3 Most identity theft insurance has a deductible ranging between $100 to $1000. So, if your costs are below your deductible, you are still going to pay for that out-of-pocket first. Since most victims usually spend under $1,500 to recover from identity theft, the insurance may not be worth the cost.
#4 Some credit cards offer identity theft insurance for free. So if your cards offer it for free, then it doesn’t make sense to pay for identity theft insurance from another source.
#5 If an institution does offer you free identity theft insurance, make sure that it will always be free. You don’t want to start being charged a fee for the same service months, or even a year later. Some institutions do this and don’t make it clear at the time you sign up for their identity theft insurance.
#6 Consumer advocates say that it usually is not a good idea to purchase any insurance that is single use. For example, you should buy health insurance that covers all aspects of your physical health, rather than buying insurance that only covers diabetes.
#7 Instead of buying identity theft insurance, you can do the same thing for yourself — simply by monitoring your credit reports from all 3 credit bureaus and paying attention to your credit card statements and bank statements. Watch closely to make sure that nothing is off.
#8 In addition to monitoring your own credit reports, you can also place free 90-day fraud alerts at all of the major credit bureaus. You only have to do it with one agency, since that agency will notify the other two. With a fraud alert in place, any time someone tries to take out credit using your name, the institution will call you to verify that it’s you trying to do it. On the 91st day, you can set the fraud alerts up again. You can do this indefinitely with just a phone call.
#9 Identity theft insurance can cost you anywhere from $25 to $180 a year. When you do most of what identity theft insurance does by yourself, in some cases you can save quite a bit of money.
Should You Pay A Professional Or Do It Yourself?
The truth is no one is immune from identity theft. Even if you pay for identity theft insurance, it is no guarantee that your identity won’t get stolen. When companies offer a guarantee it’s usually a guarantee to clear your name and restore your credit after the fact.
Whether you pay someone to monitor your credit reports or choose to do it yourself, the more proactive you are and take preventative measures ahead of time, the less likely you will be to fall victim to identity theft.
Perhaps you’ve heard of Lifelock, the popular identity theft insurance company? Their identity theft insurance costs $110 a year, but almost everything they do you can do yourself — with 2 exceptions:
- their service that scours websites that are known to sell identity info illegally; and
- their service where they can tell if you someone else has changed your address in an attempt to use your identity.
However, the fact of the matter is these websites come and go, as do the criminals. So while this type of service may sound good, I have my doubts as to how effective any one identity theft company could be doing this.
So, do you really need to purchase identity theft insurance? Ultimately that is a decision that only you can make. For me personally, I don’t think the cost justifies it since the majority of what they do I can (and do) do myself.
More About Identity Theft
- What To Do If Your Identity Is Stolen
- FTC’s Identity Theft Website
- What To Do If You Suspect Identity Theft
- Identity Theft Resource Center
- The Biggest Data Breaches By Year
- Is Identity Theft Insurance Worth It?
- Government Resources To Combat Identity Theft
- Put A Security Freeze On Your Credit Cards To Prevent Identity Theft
My favorite things to write about are topics that have to do with pregnancy, weddings, saving money, living green, and life with dogs. When I’m not writing, I love to spend time with my husband, read, create 3D artwork and Native American beadwork.