The phrase “identity theft” has become one of those terms that makes one’s blood run cold. We’ve heard so many stories of financial losses, ruined credit and related horrors that we react emotionally to the subject.
That emotional response has prompted many consumers to buy insurance that kicks in if some form of identity theft strikes the insured. The question before us is, is such insurance worth the cost?
There’s no simple answer, as is usually the case in consumer matters. The quick historical view back to 2006 finds Consumer Reports said such coverage was “typically not worth the money.” The magazine notes more than half of ID theft protection is sold by banks, and that those premiums amount to a consumer subsidy for federally required loss protection through credit card and bank account fraud. The passing of time hasn’t changed CR’s opinion that you can — and should — take more effective steps yourself to protect your credit and good name.
ID theft insurance typically costs $120 to $300 a year. That’s more than victims often incur through the theft and misuse of their credit card numbers, the most frequent type of ID theft. Federal law limits liability in such cases to $50 per card.
Those who sell the coverage point to the time-consuming process of restoring credit and correcting information on their credit histories. The insurers say their policies can help consumers cope with what can be a trying and frustrating process.
Most people in the insurance industry give the same advice they would when buying other types of coverage. Find out what the policy limits are; the National Association of Insurance Commissioners says most ID theft policies have policy limits of $10,000 to $15,000. If the policy covers lost wages, find out how the coverage is triggered and what limits apply. Know if there is a deductible; some policies require the holder to pay as much as $500 toward the cost of reclaiming your financial identity before the insurer pays a penny.
Before buying, check your homeowner’s insurance policy. It may include ID theft coverage, or you might be able to add coverage more affordably than buying separate coverage. If you decide to buy a separate policy, compare the coverage of several companies.
The insurance commissioners warn against becoming a victim of insurance fraud by making sure the agent and company you’re dealing with are licensed to do business in Maine. Find the Bureau of Insurance online ( http://www.maine.gov/pfr/insurance), by phone (207-624-8475 or TTY 888-577-6690) or by writing to the Bureau at 34 State House Station, Augusta ME 04333.
David Leach, principal consumer credit examiner for the Maine’s Bureau of Consumer Credit Protection, advises people to be their own advocates. Leach says it’s critical for each of us to get one free credit report from one of the reporting agencies (Experian, Equifax and Trans Union) every four months. Do this by visiting www.annualcreditreport.com and only that site. That, plus keeping a close watch on all credit card activity, will help keep identity thieves at bay.
As to separate insurance, Leach says, “Consumers who sign up for these types of services are paying close to $250.00 a year for a service they can essentially run themselves.” He notes that most financial institutions that issue credit cards will waive all losses in cases of identity theft or fraud. Visit the bureau’s website at www.credit.maine.gov.
For a rundown on federal ID theft laws and tips to protect yourself, visit the Federal Trade Commission website, www.consumer.gov/idtheft.
Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write: Consumer Forum, P.O. Box 486, Brewer 04412, or go to necontact.wordpress.com, or email email@example.com.