A Review of Identity Theft Insurance

Because identity theft is both lucrative and easy to get away with, ID theft rings are growing and fast in crime circles from meth addicts to mafia. Consequently, there has been an overwhelming corporate response to meet increased demand for identity theft protection.

You have probably heard of LifeLock, an Identity Theft Protection company that has been in the news quite a bit lately. In a ballsy move, the company's CEO Todd Davis has published his Social Security number (475-55-5462) prominently and dared anyone to try to steal his identity. Actions speak louder than words, and his certainly show confidence in the protection his company offers. One of the fastest growing companies in the US, Davis must have instilled confidence in his customers with inventive marketing strategy, gaining over 1,000,000 customers last year alone.

So what exactly is it and what do they do? Should you join? We've gathered some information about the company and the protection they offer here:

What is it and how does it work?

The system places fraud alerts at all three credit bureaus and essentially makes these alerts permanent. What is a fraud alert? In 2003 Congress passed the Fair & Accurate Credit Transactions Act (or FACTA), which forces credit bureaus to allow you to put a fraud alert on their credit reports, requiring lenders to verify your identity before issuing a card in your name. This alert is temporary, expiring after 90 days, but LifeLock essentially makes these alerts permanent by renewing them before they expire. In effect, if someone gained your personal information and attempted to open a fraudulent credit card in your name, the credit bureaus would have to speak with you to verify your identity before processing the application.

1- opts customers out of preapproved credit offers and junkmail lists, a known source of identity fraud.

2- orders your credit report from all three bureaus, which is automatically delivered to you every year.

3- True Address monitors the National Address Database and alerts you if a criminal has changed your address to receive your mail or obtain your personal information.

4- Lifelock's Erecon monitors hacker and criminal websites for your credit card numbers and personal information, and lets you know if anyone is attempting to steal them. LifeLock will assist you in replacing your account numbers in the case your privacy has been compromised.

5- offers a $1,000,000 Total Service Guarantee. For legal reasons, LifeLock does not call this insurance. In effect, they pledge to cover your costs (i.e. reimburse financial loss, legal fees to restore credit, etc.) in the event that your identity is stolen up to the amount of one million dollars. Note, this does not cover someone stealing your credit card and using it (which rarely costs you anyway, as this is the bank's domain). It also only covers new cases of identity theft, existing identity theft victims will not be covered. From their website:

"If your identity is stolen while you are our client, we're going to do whatever it takes to recover your good name. If you need lawyers, we're going to hire the best we can find. If you need investigators, accountants, case managers, whatever, they're yours. If you lose money as a result of the theft, we're going to give it back to you. We will do whatever it takes to help you recover your good name and we will spend up to $1,000,000 to do it."

Other LifeLock Features:

* Identity theft protection for children (until age 15) for $25 a year
* LifeLock Customer Service is available 24 hrs 7 days a week

In summary: this is proactive rather than reactive, stopping identity theft before it happens. Security expert Bruce Schneier maintains, In reality, forcing lenders to verify identity before issuing credit is exactly the sort of thing we need to fight identity theft. Making information harder to steal can be quite difficult, you can be very smart and safe and still have your purse stolen, for example. A better solution may lie in making stolen information more difficult to use, and this is the approach LifeLock uses.

How much does it cost?

Protection costs $10 per month or you pay for a year in advance for $110 a year. In addition, various websites offer promotional codes and coupons, advertising yearly protection for $99.

Is it worth it?

It is important to know that almost all of the protection LifeLock offers (fraud alerts, credit reports, etc.) you can do yourself for free. In this regard, they are a service company, saving you the time and hassle of taking these precautions yourself. Here is the information you need to protect yourself (for free):

1. Put a fraud alert on your account. All you have to do is contact (by phone or online) one of the three major credit bureaus and request a fraud alert. No need to contact all three, as they are required to communicate fraud alerts with each other. Remember to renew the fraud alert every 90 days. Fraud Alert Contact Information:
* Equifax
* Experian
* TransUnion
2. Opt out of credit card offers and junk mail.
3. Get your free annual credit report.

In addition to these measures (whether you pay for them or do them yourself), there are other precautions you should take to protect yourself against identity theft.

* Lock your mailbox with a secure locking mailbox.
* Switch from paper bills to electronic bills.
* Shred confidential mail with a cross-cut paper shredder.
* Do not carry paper checks or your social security card on you when possible.