Identity theft insurance is available,
but do you really need it?
By Lucy Lazarony • Bankrate.com

March 15, 2000 -- Peace of mind -- for a price.

A slew of credit monitoring and protection products already promise to look over your shoulder and make sure no one has swiped your credit card number or applied for credit in your name.

And now Travelers Property Casualty Corp. has launched identity fraud protection should the worst happen and a thief steals your identity. In identity theft, an impostor buys cars, charges up credit cards, rents apartments in your name and then vanishes.

Stolen papers, ruined credit
Somehow, somewhere, a thief snatched your Social Security number, credit card numbers, date of birth, and other personal information and has been posing as you ever since. Your credit is ruined.

Most identity theft victims never find out how it happened. They learn of the crime when an angry creditor calls or a credit card is declined. Experts estimate that at least 400,000 Americans are victims of identity theft each year.

Consumer activists, credit bureaus and federal agencies are meeting in Washington D.C., this week to discuss ways of clamping down on identity theft. The U.S. Treasury is hosting the summit at the request of President Clinton.

"The crime is definitely on the increase and it shows no sign of stopping," says Linda Sherry, editorial director at Consumer Action, a San Francisco-based consumer advocacy organization. "It's a frightening thing."

Picking up the pieces
Identity theft victims are not responsible for the debts incurred by their impostors, but they are stuck cleaning up the credit mess. Restoring your credit and your name is a slow, painstaking process. It means countless phone calls, letters and time away from work.

The aim of Travelers' identity fraud coverage is to help victims cope with the cleanup.

"With identity theft, once you find out about this, it's just the beginning," says Bob Nighan, vice president at Travelers. "There are a lot of out-of-pocket expenses that people incur in the cleanup process."

Identity Fraud Expense coverage can be added to any Travelers homeowners or rental policy for an additional $25 a year. It provides $15,000 worth of coverage and has a $100 deductible. It is currently available in 20 states.

The coverage includes:

• Lost wages as a result of time taken off from work to deal with fraud, with coverage of as much as $500 per week for four weeks.
• Notary and certified mailing costs for completing and delivering fraud affidavits.
• Fees for reapplying for loans that were declined due to erroneous credit information.
• Phone charges for calling merchants, financial institutions and law enforcement agents to discuss the fraud.
• Some attorney fees.

Keeping the paycheck
Beth Givens, director of the Privacy Rights Clearinghouse in San Diego, says the strongest component of Travelers' insurance coverage is its coverage for lost wages.

"If you're self-employed or paid an hourly wage, I think the coverage is quite valuable because a certain amount of your salary is recouped," Givens says.

She says there is no telling just how long it will take an identity theft victim to restore his or her good name.

"I've heard of people who are sorting things out for months or even years," she says. "You might spend anywhere from six months to two years recovering from identity theft."

Lengthy forms, letters and long-distance phone calls eat up vacation days. Worse yet, some identity theft victims are forced to take unpaid time away from work.

"The most common complaint of identity theft victims is they have to take time off work," Givens says. "I can't tell you how many people have called and said 'I had to take a week off work.' "

Mari Frank, an identity theft victim and attorney who has written The Identity Theft Survival Kit, also cited the compensation for lost wages as the strongest aspect of Travelers' protection.

"This is helpful -- for time off work -- but probably not enough," Frank says.

Frank estimated that she spent 500 hours cleaning up her credit nightmare. Her out-of-pocket expenses were about $10,000.

A do-it-yourself operation
The other aspects of Travelers' identity theft protection are a mixed bag. Coverage for certified mailing and phone costs is appropriate and helpful. Coverage for attorney fees is less so. Few identity theft victims need the services of an attorney.

"Most cases can be handled by yourself," Givens says.

And, as Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group, points out, nothing in the Travelers coverage can lessen the emotional toll or speed up the recovery process for victims.

"The big cost is the emotional trauma," Mierzwinski says.

But if it helps folks to know that some of their wages will be covered if an identity thief strikes, consumer experts say go ahead and sign on for the coverage.

"If it's worth some peace of mind for some people, for $25 a year, I'm not going to tell you not to do it," Mierzwinski says.

Low-cost protection
Indeed, $25 a year seems quite a bargain when compared with the costs of other credit protection and monitoring products on the market. These products, which promise to keep a close eye on your credit report and alert you of any suspicious activity, can cost anywhere from $50 to $100 a year. Chances are, you've received an offer for one of these products wrapped around a credit card bill or in an evening phone call from a telemarketer.

Holders of Citibank credit cards may enroll in CreditNotifySM, a credit bureau monitoring service that sends out a monthly report detailing credit activity. The cost is $8.99 per month, which adds up to $107.88 a year.

PrivacyGuard from Cendant delivers quarterly reports from a credit bureau, driving records, medical records and Social Security data for a price of $59.95 per year.

Sentinel Credit Monitoring service from Equifax provides quarterly updates of your credit profile and lets you view your profile online. The price? $49.95.

"There's not anything being done here that a consumer can't do themselves," says Beth Grossman, identity theft program manager at the Federal Trade Commission.

"We encourage consumers to check their credit reports themselves."

Our basics section on credit reports can help you do that.

Watching that credit report
These commercial products, while pricey, may appeal to identity theft victims who continue to watch their credit closely. Consumer experts urge victims to check their credit report every three months.

"In those situations, being a member of a service or plan that sends you reports could be a convenience," Givens says. "The problem with that is it's going to cost you $60 to $70 a year.

"If you're a busy person and you don't want to put the burden on yourself to call every three months and you have the money, these services could be a convenience and a comfort."

Of course, no product can replace the importance of playing it safe when it comes to giving out personal information.

• Avoid carrying your Social Security number and driver's license together in your wallet.
• Tear up pre-approved credit card offers, bills and documents with other personal information before throwing them out.
• Drop paid bills directly into U.S. Postal Service mailboxes. Avoid putting outgoing mail in your home mailbox.

Folks who are nervous about identity theft may want to consider putting a fraud alert on their credit files. With a fraud alert, a credit bureau must contact you before any new credit can be approved. An identity theft victim puts fraud alerts on credit files to prevent an impostor from applying for and receiving even more credit in the victim's name.

The price of protection: convenience
The downside of a fraud alert is you give up the convenience of "instant credit." So you can forget about signing up for a new credit card and going shopping with it three minutes later. The upside is the knowledge that no new credit can be granted in your name without your knowledge and approval.

For more information about the putting a fraud alert on your credit file, contact the credit bureaus.

"If you've got your house, got your car, got your two credit cards and you know there's no other credit that you'll be getting in the near future and you're very, very, very concerned about identity theft, take advantage of the fraud alert," Givens says.

Regardless of what precautions you take or don't take, everyone is at risk when it comes to identity theft.

"Ultimately, you cannot prevent identity theft from happening to you," Givens says. "You can only reduce your chances."

-- Posted: March 15, 2000