Identity Theft Insurance

Fact: Identity theft and related crimes are the number one consumer crime in the United States and rising around the world. A recent survey found that more Americans are worried about that than about losing their jobs. In response, identity theft insurance policys are becoming very popular.

What is it?

According to the Insurance Information Institute, which lists about a dozen major companies offering identity-theft coverage, the typical policy provides "$15,000 to $25,000 worth of coverage ... for expenses such as phone bills, lost wages, notary and certified mailing costs and sometimes attorney fees with the prior consent of the insurer."

How do I get a policy?

There are three ways to obtain identity theft insurance:

1. As a rider to your existing homeowners or renter policy.

2. As a stand alone policy issued by a third party insurer.

3. Through your credit card.

A policy will typically cost somewhere between $60 and $150, but check with your credit card company because their coverage often is free.

What to look for:

A low deductible. According to the ID Theft Resource Center, the average out of pocket expense is $800.

Reimbursement for lost wages. The average victim spends more than 170 hours sorting out the mess. and will likely have to take time off from work to visit government offices that are only open during business hours.

Attorney's fees. If you're sued because someone committed crimes in your name, you may need to hire a lawyer. That can cost thousands of dollars, so make sure your policy covers it.

Cost of denied credit. If your identity is stolen, you may not know it until you are turned down for a loan. Any identity theft insurance policy should cover the cost of reapplying for a loan, along with the cost of removing negative items from your credit report.

Is it worth getting a policy?

Critics say ID theft insurance is not necessary because the this kind of crime very rarely results in major financial losses. In most cases, you can't be held liable for more than $50 in fraudulent credit card purchases. While restoring your credit is a time-consuming process, "it's not the kind of catastrophe you would normally buy insurance for," says Robert Hunter, director of insurance for the Consumer Federation of America.

Others say a low-cost policy could is worth it. A policy that costs $25 a year could quickly pay for itself. But remember, identity theft insurance cannot protect you from becoming a victim of identity theft and does not cover direct monetary losses incurred as a result of identity theft.

So what else can I do?

1. Burn or shred, with a cross shredder, any mail or financial papers with your personal information on it. Never recycle them.

2. Call 1-888-5OPTOUT and ask to stop credit card companies from sending pre-approved credit card applications to your house.

3. Ask your credit card firm to stop delivery of "convenience checks."

4. You're entitled to one free credit report each year. Get it as soon as possible and review it carefully.

5. Order a credit report a month or more before you make a big purchase or apply for credit, to be sure there are no surprises in your history.

6. Hassle companies that ask for personal information, such as your phone number at a checkout line. The harder we make it on companies, the less they will be inclined to continue the practice.

7. It's impossible to tell what's real and what's fake online. Just delete any e-mail that asks for personal information.

8. Just hang up on telemarketers, particularly ones who seem to be fishing for personal information, like your birthday.

9. Limit the number of credit cards you hold, and religiously inspect your financial statements each month. Consumer rights quickly fade over time; the sooner you discover an identity theft incident, the better.

10. If maintaining and monitoring your credit is confusing or time consuming, consider a reputable agency to handle it for you.