Identity Theft Insurance and Credit Monitoring

With the realistic threat of identity theft always looming, consumers are becoming more and more paranoid about becoming victims of fraudulent activity. With that paranoia comes the opportunity for banks, credit card companies and other similar institutions to cash in on consumer's fear. Anyone who has researched identity theft for even a short length of time has probably seen countless advertisements for credit monitoring services and identity theft insurance. But what do those things really offer and are they worth the investment? 

Credit Monitoring

Certain companies are offering credit monitoring services for a fee. If you agree to pay the fee you will be notified of any change of address, new account or inquiries made on your credit file. This initially sounds like a pretty good deal, but what they don’t tell you is that your social security number isn’t monitored in all of this which leaves you vulnerable to other forms of identity theft. 

Really savvy identity thieves will open accounts under an alias while using your social security number. Since the credit bureaus cannot determine which name is rightfully associated with any given social security number (because the SSN office won't release that information) if enough credit applications are filed with the same name and social security number they just assume its legitimate and a new file is created. What this means is that a credit monitoring service will not alert you to the fact that someone has opened a new credit account under your social security number but with a different name. Eventually, if each credit bureau’s computers runs enough searches the fraudulent file will eventually become attached to your own. And your credit will be ruined by the long history the thief had been running up without you even knowing it. Literally, your credit could be good one day and horrible the next--with no warning.

In theory credit monitoring services may sound like a good deal, but they aren't. If you plan to make an investment in any type of monitoring system, purchase something like Affinon's ID Secure that will monitor both your social security number as well as your credit files. 

Identity Theft Insurance

Just like with all other types of insurance, identity theft insurance is offered as a way to protect yourself from possible harm. But that doesn't mean you should blindly sign on the dotted line just for peace of mind. It's important to note that the institutions offering most identity theft insurances are banks and credit card companies-the same companies that failed to protect your information in the first place.  Another startling reality is that identity theft insurance does not reimburse you for any money stolen from your bank account or fraudulently charged to your credit card. Some companies offer insurance that will offer you compensation for lost wages up to $2,000 but most simply offer to cover legal fees. In many identity theft cases, no legal fees are incurred as attorneys aren't usually necessary for resolving identity theft cases.  Identity theft insurance also won’t cover you at all if your identity is stolen by a family member. Since most identity thieves know the victims whose identities they steal it is highly likely that should your identity ever be stolen a family member of some kind will be involved. Therefore, any insurance you have will become null and void. 

Some identity protection companies offer millions of dollars in "insurance coverage" if your identity is stolen. But take a moment to read the fine print, and you may find that these "guarantees" are worth a lot less. For example, TrustedID's $1,000,000 warranty covers all of the above only if a member suffers a stolen identity as a direct result of failure of their service. Suddenly, that million dollar claim isn’t really going to net you one million dollars should your identity be stolen.

So, in reality, identity theft insurance doesn't recover any stolen money, it doesn’t protect you from the people most likely to steal your identity and it doesn’t eliminate the time and hassle you will spend dealing with banks and creditors—who will only work with your personally and won’t allow a representative to handle the case in your place. Simply put, identity theft insurance is all talk and advertising. It’s not worth investing even a small amount of money in. So, skip it and look for free ways for identity theft protection. You'll do more good for yourself that way.