Bad guys don’t need to break into your house or snatch your wallet to steal from you. Identity theft has become one of the major hassles of the digital age and the genesis for a multi-billion dollar industry.
An estimated 8.6 million households suffered identity theft in 2010, according to the Bureau of Justice Statistics. Most of the households — about 5.5 million — were victims of unauthorized use of an existing credit card. Fewer than 800,000 households – less than 1 percent – were victims of ID theft cases in which the crook used personal information to open new credit accounts, tap your health insurance, earn income, or commit crimes.
Your losses are limited if someone swipes your credit card or debit card information. Your liability is limited to $50 for a lost or stolen credit card and most credit card companies eat even that loss. The liability for an unauthorized transaction on a debit card is capped at $50 if it’s reported within two business days of the date you learn of it.
Identity-theft protection services are available from banks, credit bureaus and specialty companies such as LifeLock. You also can often buy identity-theft protection from your homeowner’s insurance company. The cost ranges from $75 to $300 a year.
The wide range in cost, in part, reflects the wide range in service provided. Shopping for an identity-theft protection service requires scrolling through a lot of proverbial fine print to figure out exactly what you’re getting for your money.
A report issued in April by the Consumer Federation of America found that identity-theft protection services typically over promise and under deliver. The report notes that while such services may alert customers to identity-theft quicker, “they can’t prevent consumers’ personal information from being stolen or detect identity theft in all instances.”
Some companies will help you clean up the mess created when a thief steals your identity. Again, you need to read the fine print. Some companies will simply advise you on what steps to take and perhaps provide the template for the letters you have to send out. The service provided by Zander Insurance – armed with a limited power of attorney provided by the customer – rebuilds your identity and cleans up your credit report, following up with the three credit bureaus to make sure the bad information is deleted from the database.
“Sometimes it takes a couple of weeks, in one case of family fraud in which Senior stole the identity of Junior, it took nine months,” says Diane Sacks of Zander.
Most identity-theft protection services provide little more than a false sense of security. Identity-theft protection insurance is listed among “types of insurance” you don’t need by “Consumer Reports” and others.
You can much more cheaply protect your information by placing a freeze on your credit reports at Equifax, Experian, and TransUnion, and monitoring your bank and credit accounts.
But, if the service you’re considering really and truly cleans up after identity theft, it may be well worth the premium to avoid the time-consuming hassle of dealing with creditors, credit bureaus and such.
But read the fine print carefully.