Personal Identity Insurance: Essential Protection or Unnecessary Expense?
Recently, I learned I was part of the National Public Data breach and my personal information was leaked on the dark web. This prompted me to research identity theft insurance – insurance that helps cover the costs associated with restoring your identity after it has been stolen – and find out if it was worth purchasing. Identity theft insurance providers typically offer: (1) credit monitoring – monitoring your credit, Social Security number, bank accounts, and scanning the dark web to detect if your personal information is being traded or sold, and (2) identity theft insurance. Identity theft insurers openly admit they can’t stop your identity from being stolen, but promise a smooth remediation process in the event of identity fraud. Interestingly, I also learned you can protect yourself and even remediate identity fraud for free. You will just have to see if identity theft insurance is worth it for you.
Identity Theft Insurers
The two top providers of identity theft insurance, Aura and NortonLifeLock, don’t shy away from letting you know that they can’t prevent identity theft – I presume they are so forthcoming because they don’t want to be accused of false advertising and get sued. Aura’s website acknowledges that “identity theft protection services can help you monitor your sensitive information and accounts, warn you if your identity has been stolen, and navigate the recovery process — but unfortunately, these services can’t do much to stop your identity from being stolen in the first place.” NortonLifeLock makes similar claims.
While these companies do provide helpful features – such as removal of your personal info from Data Brokers, credit monitoring, and antivirus for your devices – it appears the true value of their services applies after you are a victim of fraud. For instance, Aura has a White Glove Fraud Resolution team that will help you resolve an identity theft incident. They’ll create a remediation plan and hand-hold you through the process until the issue is fixed. I called and spoke to a sales representative at Aura to find out more about the remediation process. Essentially, you file a claim with their fraud team and they will initiate the research and complete the fraud remediation process. I could not get much more details about the process since every case will differ.
Remediation May Be Easier Than You Think
From what I have read, everything a remediation specialist (or team of specialists) will do, you can do yourself. Should you become a victim of identity theft, The Federal Trade Commission provides helpful resources and a recovery plan. To get an idea of what you will have to do, check out the list of possible recovery steps posted on the FTC’s site. If you are organized, you can follow the advice on the FTC’s site and you should be able to remedy the fraud yourself. I understand every situation will differ, but I am under the impression, identity theft insurance is not a necessity, and more of a luxury. It may be useful for an elderly person who may have trouble navigating the remediation process or for yourself, if you don’t want the hassle of dealing with the remediation process.
Existing Protections: These Do Not Cost A Thing
Before you jump into buying identity theft insurance, you may be surprised to know you already have some of the existing protections:
Existing Fraud Protection: Many financial institutions, such as banks and credit card companies, already provide fraud protection and will reimburse you for unauthorized charges – so the financial impact of identity theft may be minimal.
Legal Protections: U.S. law, such as the Fair Credit Billing Act and Electronic Fund Transfer Act, limits your liability for fraudulent charges to a small amount (often $50 or less), and many banks waive this fee.
Monitoring and Alerts: You can actively monitor your credit and bank accounts through free services or by directly checking your statements. Many companies offer free credit monitoring, which can help you detect fraud early.
Fraud Alerts and Freezes: You can place a fraud alert or freeze on your credit report, making it more difficult for identity thieves to open accounts in your name.
Low Likelihood of Severe Loss: While identity theft can be stressful, the financial losses are often not severe enough to justify the cost of insurance. Most people recover from identity theft without significant out-of-pocket expenses.
Sign up for data breach notifications: Get free alerts about major data breaches from the Identity Theft Resource Center or HaveIBeenPwned.
Use public resources for reporting and recovering from ID theft: Report all types of identity theft to the Federal Trade Commission (FTC) at IdentityTheft.gov and receive a personalized recovery plan if you become a victim.
Other Options for Identity Theft Insurance
I also learned that insurance companies like Allstate and State Farm offer identity theft insurance policies, that are add-ons to home and renter’s insurance. For instance, State Farm offers identity restoration insurance and fraud coverage. State Farm will provide expense reimbursement for theft and assign a case manager who will work directly with your credit card companies, credit bureaus, creditors, and other financial institutions for up to one full year for a covered incident. Additionally, State Farm will reimburse you up to $50,000 for necessary and reasonable expenses incurred to restore your identity (including attorney fees).
Best And Most Cost Effective Solution
From everything I have read, freezing your credit with the three major credit bureaus is the best way to protect yourself for identity theft. Freezing your credit is free – so if you are not actively applying for a credit card or loan, this may be the safest and most practical way to protect yourself. When you do need to open a credit card or open a new loan, you can then unfreeze your credit.
However, as I previously mentioned, freezing your credit can be inconvenient. You need to contact all three credit bureaus. You also have to establish accounts with Equifax and TransUnion when you freeze or thaw online, while PINs are required when you unfreeze by phone or postal mail. Meanwhile, Experian requires you to keep track of your PIN to freeze and unfreeze your files regardless of method.
Conclusion
Identity theft insurance is not always necessary because many aspects of identity protection can be managed through other means. By being vigilant, using available free resources, and understanding your existing protections, you may find that purchasing identity theft insurance isn’t essential. If you want a piece of mind and knowing you will have help when your identity is used, you can purchase identity theft insurance.