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January 22, 2013

Identity theft insurance? Is it really worth it?

Is Identity Theft Insurance worth the money?  Not really.

In fact, is it even insurance?  Insurance is supposed to pay for things to be replaced or repaired in the event something bad happens.  Home insurance pays for repairs to your house after its damaged by a fire or a storm.  Flood insurance will pay to replace something damaged in a flood.  Car insurance will pay to repair your car after a wreck.  Life insurance replaces the income of a deceased family member.

Identity theft "insurance," on the other hand, does little to repair the damage caused by identity theft.  Sure, it will reimburse a victim for some out of pocket costs, such as certified mail costs and notary charges.  At a cost of $15.00 to $20.00 a month, identity theft insurance seems like its a good deal.  But its not.  It covers little.  

Identity theft insurance does nothing to fix the main thing damaged by identity theft - the victim's good name.  Identity theft insurance does nothing to correct the errors on the victim's credit reports caused by the appearance of the numerous fraud accounts opened in the victim's name.  It does not eliminate from the victim's criminal record any charges for crimes committed in the victim's name.  It does not reimburse the victim for the mental anguish and stress caused by dealing with uncaring credit bureaus, fraud credit grantors and relentless collection agencies.  Nor does identity theft insurance reimburse victims for the embarrassment they suffer when denied credit due to the unpaid fraud accounts appearing on their credit reports.

Instead of wasting money on identity theft insurance, consumers should save that money and instead be proactive about protecting their Social Security Number and disputing the fraudulent accounts if and when their identities are stolen.  Then, if the credit bureaus and the fraud credit grantors fail to fix the errors caused by the identity theft, the consumer should hire an experienced Fair Credit Reporting Act attorney (like me!) and sue the credit bureaus and credit grantors using the Fair Credit Reporting Act.  Not only does filing such a lawsuit not cost the consumer his or her hard earned money (like identity theft insurance does), if the consumer prevails at trial or settles with the credit bureau, the consumer receives compensation for all he or she has gone through.  

Do yourself a favor.  Don't pay for identity theft insurance and, if you feel like you must, simply add it as a rider to your existing homeowner's insurance.  That's a much cheaper option (usually $20 or $30 a year, rather than a month) and provides the same level of coverage.  And, if you end up being a victim of identity theft, don't just look to your identity theft insurance for reimbursement.  Hire an experienced consumer attorney who can get your credit report corrected and get you fair compensation for your damages.

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