Is Identity Theft Insurance Worth the Cost?
A fabulous reader asked me the following question via email:
Hi Single Ma:
I have a question for you in reference to identity theft insurance and hoped you could answer it for me in layman’s terms. Sometimes I get lost when it comes to the terms used in regards to financial issues. My credit isn’t the best right now but I am almost there, and wanted to know if identity theft insurance is really worth it. I have read a couple of places that it is not but I would rather talk to you because your explanations make perfect sense and are easy to understand. Thank you in advance.
Single Ma’s Thoughts:
Nope, it isn’t worth it to ME because:
1 - Paying for it doesn’t guarantee that my identity will NOT be stolen. So if Big Company Z can’t guarantee it won’t happen, what exactly am I paying for? Just in case it DOES happen? How the heck is that beneficial to me?
2 - Whatever the insurance company will do if I became a victim of identity theft, I can do myself for FREE. Such as:
- monitor my reports to be aware of unusual activity as soon as possible
- file a police report
- call all 4 credit bureaus to put freezes on my reports (they may only do the main 3)
- request a copy of my credit reports
- call my creditors to close stolen accounts
- call new creditors that I wasn’t aware of to notify them of the identity theft
3 - Most credit cards have zero liability or a maximum $50 liability if I report the identity theft within xx days. The accounts will be frozen immediately, and after proof of a police report, new cards may be issued at my request.
4 - I can monitor my own credit reports by going to AnnualCreditReport to get the main three reports for free. Some people get one credit report every 3-4 months to space it out, but I prefer to see all three at the same time because they often report different things. Also, for people who live in a qualifying state or experience one of these situations, they can request additional reports directly from each credit bureau for free. Some banks even offer their customers free monitoring services that provide immediate notifications of any changes via email.
The only way I’d consider buying identity theft insurance is if they will:
1 - Assume all liability and pay all balances IF I was held responsible for the charges.
2 - Hire representation and cover all legal fees IF I had to appear in court to clear my name.
3 - Refund a % of the premium if I didn’t experience identity theft during the coverage period.
Otherwise, I can do it myself for free. Everyone should actively manage their own credit anyway. Always remember, no one is going to look out for you better than YOU.
~*~*~*~*~*~Work to achieve, not to acquire.
And as always, BE FABULOUS!
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13 comments:
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Why Does Dave Ramsey Push Identity Theft Insurance*? « Finance Gets Personal (Pingback), 18 March 2008, 22:21
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Have you read the Fabulous Financials comment policy lately?
Four credit reporting agencies? Is Innovis the 4th? Or PRBC (Pay Rent, Build Credit, Inc.)?
Thanks for all of the wonderful information
A very good post. I agree with you. A fellow co-worker asked me similar question a few weeks ago. I pretty much gave him the same answer. Take a few minutes each month to monitor your own credit report.
If someone stole my identity, I can’t imagine what good it would do them. It’s not as if they’d be able to get credit with it!
p.s. I looked up the definition of fabulous: resembling or suggesting a fable. Sooooo, which fable(s) do you your financials resemble or suggest?
LOL @ MW
Fabulous is a word used to express high commendation. According to Dictionary Reference, it also means:
1. Almost impossible to believe; incredible - as in a fabulous bargain.
2. Exceptionally good or unusual; marvelous; superb - as in a fabulous new house.
3. Extremely pleasing or successful - as in a fabulous vacation.
Or to capture all of the above, my FABULOUS FINANCIALS!
I’ve been blogging for over 2 years and you’re the first person to finally ask me that. LOL
I too am not totally sold on the idea of the ID theft insurance. However, one benefit I do see (depending on the insurance), if you are a victim, the company will assign someone to your case to do the follow up with the credit reporting agencies and the creditors. From what I hear, this is where most of your time is spent and where most of the frustration is felt.
She or he can just freeze their credit report for $10
This is great advice.
p.s. What is the 4th credit reporting agency?
I co-sign on your post. Great advice.
Uhhh…..I thought we only had 3 credit reporting agencies. Who is the fourth??
Innovis Data Solutions
Read more about the 4th bureau [here].
You are SO fab!! What a great way to break it down to your readers. We all have to take responsibility for monitoring our own credit files for accuracy.
I was a vic of ID Theft in 2001. It took me at least 50-60 hours of my work time and personal time to get everything cleaned up. I would have GLADLY paid a couple of hundred bucks to have someone deal with the phone calls, police reports, avidavits. letters, emails, etc.
Calling the credit agencies and creditors, closing the false accounts and putting a block on the three agencies was the easy part. It was dealing with the fall out:
* collection agencies,
* making sure the creditors actually CLOSE the account
* dealing with bank investigators (the scum created fake checks too!)
I didn’t shell out a penny but it was a giant pain-in-butt. I still have blocks on my credit….
What about drivers license being used, social security being used, arrests being made?
Fixing the credit is the easy part of cleaning up your identity theft. A person can use your social security number, license and info gained from data bases (professional hackers). Then they can buy a car, get arrested, use your medical ins- run up a hospital bill, get things on your medical records that are not your illnesses etc. What about those problems?