Identity Theft

If you are the average person living on the average income the answer is no. Identity theft insurance and credit monitoring services are marketed largely through scare tactics, but a savvy consumer can follow just a few simple steps as follows, to cover themselves without paying a penny.

View your annual credit report once every four months

Experian, Equifax, and Transunion will each provide you with a full credit report once per year. Use this report to review open accounts and make sure there are no extras. Also take a little time to make sure there are no legitimate mistakes on your existing accounts such as a payment incorrectly marked as late. If you want to view your actual credit score you will need to pay extra unless you happen to have a credit card such as a Providian (now Washington Mutual) Visa which gives you a monthly update on your credit score through an online account.

Monitor your own accounts

Before the advent of check cards balancing one’s checking account was a vital monthly act. With check cards and online account access available many have cut back on or even eliminated this practice. By continuing to check not only your bank statements but also credit card statements and statements from any other financial institution monthly you can catch any mysterious transactions. Most institutions limit your liability for such transactions to a small amount, often $50. This is usually less than the deductible on an insurance policy anyway and only slightly more than the annual cost of a credit monitoring service.

Be mindful of who you hand information to.

If someone contacts you by telephone and asks for private information such as your social security number do not give it out. Nobody sales person or survey taker needs your social security number to finish a transaction or questionnaire.

Know your internet.

What is the difference between http and https? Never give personal information to a web site that is missing the “s”. Information is more easily intercepted from a non-secure http connection than from a secure https connection. Also, no financial institution will ever ask you for private information by email. If you ever get an email that appears to be from a known financial institution asking for personal information look up the phone number for that institution somewhere other than the email, preferably the yellow pages, and call the institution directly.

If you follow all of the above steps the chance that someone will successfully steal your identity is minimal, but still not zero. It will never be zero. If you use a credit monitoring service it will only tell you it is happening and it will be up to you to sort it out anyway. You can figure out on your own when someone steals your identity and it is all free. As long as you are regularly checking the reports and statements you should be able to catch unapproved activity quickly enough to control the damage to your credit report even if it is not quite as fast as a monitoring service.

If that time does come when you find some strange accounts on your credit report are you going to wish you had the insurance? Well most likely yes, but that is because you probably do not know what it actually covers. Speaking as a former insurance salesperson, it does not cover what you think it does. What identity theft insurance does cover can often be paid within or close to within the deductible anyway. Insurance companies are not just god-sends trying to make your like worry free. They are out to make money and are more than willing to gamble on the fact that chances are you will at no point in your life need their services.

There may be some circumstances in which such insurance and monitoring is appropriate. If you possess a large amount of money and a high profile you may be a prime target for such thefts. If you fall into this category your personal accountant is probably taking care of all of this for you anyway. Otherwise, identity theft insurance and credit monitoring services is marketed almost entirely on scare tactics based on overly emphasized statistics. Yes, incidents of identity theft are clearly on the rise. No, it is still not very likely to happen to most people even if they do not follow all of the steps above and even less likely to happen if they do.