Avoiding Identity Theft (continued)

Fear Sells

In light of the popular fear over identity theft, it isn’t surprising that identity theft “protection” schemes have proliferated in recent years. Credit monitoring services and identity theft insurance – two products frequently offered by credit card companies and homeowners insurance companies – will not prevent identity theft any more than auto insurance will help you avoid accidents. Moreover, the benefits they do provide are meager and, appropriately, are relatively inexpensive (a few hundred dollars per year). If subscribing to an inexpensive identity theft insurance or credit monitoring service gives you peace of mind, it could be worthwhile. The only real harm would be relying on them for substantive help in preventing or recovering from identity theft.

Credit monitoring services
These services vary in their features, but all share the common feature of alerting you when an account has been opened in your name, a big red flag if you in fact have not opened any new accounts. Companies typically charge a monthly fee between $10 and $20 for the service… an interesting irony given the fact that they, credit card companies, not you, have the most to lose in credit fraud! Some of them even provide insurance if you become a victim of application fraud. Good thing because the monitoring service only detects when an identity thief has already opened an account in your name.

However, a credit monitoring service typically monitors only one of the three credit reporting agencies, leaving the other two unmonitored. In cases where the monitoring service offers to monitor all three credit reporting agencies it is usually for only the first report. Otherwise, you will have to subscribe to three different credit monitoring services or pay more for an “upgrade” to have the monitoring service monitor all three. They also do not provide an alert if your current credit cards or bank accounts are being fraudulently accessed…only your careful monitoring can catch that. Moreover, if you have the time and inclination, all of the information you need to do a thorough review of your credit reports is available for free. Keep reading for more details.

The big selling point of a credit monitoring service for the less affluent, and one having nothing to do with protection against identity theft, is the opportunity to check one’s credit score. So, for example, if your adult child pays a little more for a premium service, he or she can play what-if scenarios to see how the credit score changes as credit accounts are opened or closed.

Identity theft insurance
Credit card companies and, increasingly, homeowner’s insurance policies, offer identity theft insurance coverage for a nominal additional fee of $75 - $200 annually. The coverage typically includes reimbursement for lost wages (usually limited to $5,000 or less), notary and attorney fees (prior consent from the insurer required), long-distance charges, and certified mailing costs, with total reimbursement under most plans limited to $25,000 or less. Most of our clients can effectively self-insure against these potential expenses.

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