Protect Your Good Name with Identity Theft Insurance

Protecting your identity and credit is absolutely critical, as nearly 25,000 people daily become victims of identity theft. People are losing their personal and financial information at alarming rates all over the country. According to Garter Research, the number of identity theft victims in 2006 has increased by 50% since the FTC reported 9.9 million in 2003.

In addition, the financial damages done to an ID theft victim are enormous. On average, thieves commit $5,700 in fraud per identity theft victim, and victims spend about 40 hours to clear their name, both through phone calls, filling out reports, and re-registering ids and accounts.

Identity theft can be a very frightening experience unless you take measures to protect yourself before it happens. Sometimes identity theft happens, and you may not know for months or years until you find out the hard way, when your credit score has been destroyed or the police show up at your door with an arrest warrant. Preventing the nightmare can be easier than you think.

How identity theft insurance protects your future

Identity theft insurance is not that different from other kinds of insurance, except for the fact that it protects your good name and your future credit. Anything that is important to you and has a potential to devastate your life is worth insuring, and your financial reputation is no different.

While identity theft insurance may not prevent ID theft from happening, it can very well help you recover losses associated with the fraud. The costs that come with having your identity stolen and recovery could be devastating unless you have this type of insurance. The possibility is great that you would not be able to fully recoup your losses without insurance, and instead, you may have to expend costs on legal fees to fix your financial reputation. Laws prevent you from being responsible for more than $50, both through the theft of funds from your bank account or fraud committed in your name. However, there are many expenses that are not covered - lost wages, phone bills, attorneys, etc.

You can expect policies to provide from $25,000 up to $1,000,000 in recovering your good name and credit score. Having identity theft insurance would allow reimbursement for related expenses, such as notary services, certified mailing costs, and phone bills. Some companies, such as Lifelock, will reimburse lost wages from job and even hire professionals, such as attorneys, to work on your behalf in legally clearing your financial reputation. The insurance would also provide assistance in replacing lost driver’s licenses and social security cards.

How credit monitoring minimizes the damage of identity theft

Credit monitoring is when a company consistently reviews your credit file for any red flags that indicate potential identity theft. Some of the alarms you will need to monitor in your personal credit report are:

• Inquiries: who is inquiring and whether they were authorized
• Any new account activity: newly opened accounts could be a sign of ID theft.
• Account status: changes in activity, such as refinancing or purchase should be monitored.
• Change of address: thieves change your address to prevent detection.
• Increase in credit limits: an identity thief can increase the credit limit to rack up higher charges.

If you use a service to monitor and place locks on your accounts, they will work with all of the credit bureaus to ensure your consistent protection. They will monitor any new activity on your report and immediately report it to you for investigation. They also place fraud alerts for you, which means that financial institutions will first contact you via phone to gain your approval.

DIY credit monitoring: avoiding the pitfalls

If you decide to monitor your credit yourself, it is feasible and costs you nothing. However, you must ensure that you consistently monitor and remember to make certain protective updates. For example, the important fraud alerts that the monitoring services place on your account must be renewed every 90 days. If you forget to renew the fraud alert, then you take the risk that someone could open an account without your knowledge.

It is very important to order and monitor your credit report frequently, reviewing in detail any new activities and suspicious signs. By law, you can order one free credit report per year. In addition, you should also remove your name from mailing lists and pre-approved credit card lists, as this is one of the most common ways identity thieves obtain personal information.

For around $10 (varies per state) you can freeze and lock your credit report, which can only be unlocked with a special PIN. Services such as TrustedID will let you do this with an easy on/off switch online, otherwise, you will have to contact the credit bureaus to lock and unlock them.

Monitoring your credit independently is possible. However, if you do not continuously monitor your credit and remember to renew alerts, then you expose yourself to the risk of ID theft. If you choose to work with a credit monitoring service, you gain peace of mind knowing that professionals are continuously protecting your credit. You never have to worry about lapses in your protection, as these services automatically take the precautions to protect you and your financial standing. In addition, these services include insurance that will protect you against loss, should identity theft occur. With a credit monitoring service, as well as practicing preventative measures, you can rest easy knowing that someone is protecting you from identity thieves.