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Is Expensive Identity Theft Protection Really Necessary?

Identity theft is a growing problem in America. Is paying $20 a month to the only way to protect yourself?

Between 2005 and 2010, the number of estimated households with at least one member over the age of 12 falling victim to some form of identity theft rose from 6.4 million to 8.6 million.

The Bureau of Justice Statistics reported that households experienced about $13.3 billion in direct financial losses in 2013, as a result of the unauthorized use, or attempted use, of an existing account, or unauthorized use of personal information to open a new account or for another fraudulent purpose.

With numbers like this, it's easy to see why Americans are handing over forkfuls of money to services like LifeLock and ID Watchdog, which promise to protect your identity.

But is it really necessary? Do you have to pay for an expensive service in order to ensure that your money, accounts and personal information stay out of the hands of criminals?

Maybe not.

For starters, the threat may be exaggerated. One of the more well-known services, LifeLock paid $12 million in 2010 in a settlement with the Federal Trade Commission and 35 states, for making false and exaggerated claims in order to promote its identity theft protection services.

And much of what those expensive credit-monitoring services do, you can do yourself for free, Kiplinger says.

Sign up for free annual reports from each of the credit reporting bureaus. If you stagger your requests and order one report every four months from Equifax, Experian and TransUnion, you'll be able to give your credit history a quarterly checkup all year, every year. Place a fraud alert on your credit file and you'll also be entitled to a free report from each of the three bureaus every 90 days. You should do this every 90 days if you've experienced a security breach.

Additionally, identity-theft insurance may not be worth the investment, depending on the amount of reimbursement. Most credit cards will only hold you responsible for $50 in unauthorized charges, but you could pay $240 a year or more for a monitoring service. Your bank or credit card company may also automatically offer identity theft insurance to account holders, and your homeowner's insurance policy might include identity theft coverage, which could make paying for identity-theft monitoring overkill.

If you do opt to register for identity theft protection, choose wisely. All monitoring services are not created equal. Compare identity monitoring companies for their protection and detection services and prices, read reviews and choose the monitoring service that fits your situation best.

Karl January 19, 2013 at 02:38 PM
Every 90 days? At that point, if someone IS trying to steal your identity, they've already made a small test run- and if you didn't catch it- you've already been had.
Patrick Lobo March 06, 2013 at 04:21 PM
Identity theft protection is not so expensive. My identity is protected by "Keepmyid" and he charge me only 11 dollars per month. but 11 dollars is OK with respect my important personal and financial information.

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