iPickpocket? Identity Theft, Credit Monitoring, and Insurance

Cash has always been king in my family.  At the store, my parents are always fumbling around with envelopes of dollar bills. My grandmother once carried around $30,000 of uncashed checks in her purse.  She was afraid of banks.  Me?  I whip out the plastic at every opportunity.

It’s hard to believe how fast and how drastically our world has changed in the last 20 years.  When Reagan and Bush the First were president (remember them?), we paid with actual currency, or we wrote a personal check.  Nowadays, many stores don’t accept checks, and for many of us, cash is now for emergencies only.  Our paychecks get automatically deposited in the bank.  Bills are paid EFT. Groceries, gas, clothes, toys, and all the other junk we buy is paid for with credit or debit card.

In the old days, when folks were walking around with cash, it was pretty easy to notice when you got robbed.  Wham! A blow to the head, you’re shoved to the ground, and some thuggish type is running off with your purse or wallet.  Or, you’re in a crowd, a stranger brushes by, and a few minutes later you realize that a pickpocket has deftly made off with your wallet.

In our electronic age, however, theft can now easily go undetected. The only symptom of electronic theft is a difference in numbers displayed on a computer screen or printed on a bank or billing statement.

Electronic theft and Identity Theft is now common. Just this December, the FBI caught a gang of thieves skimming from jimmied card readers at 99 Cent Stores in the San Fernando Valley.  Over Christmas, a thief stole $62,000 from over 200 customers who swiped their cards at a gas station in Sierra Madre .  The theft amounts were small, and many victims were unaware until they heard about it on the news.

Skimming is the new pickpocketing; theft amounts are small and often go unnoticed. But, once the crooks have your card number and PIN, those small thefts can be repeated, adding up to a large loss over time.

Identity Theft, on the other hand, is the new robbery.  By getting a line of credit in your name, a crook can steal large amounts that’ll hit you over the head when the bill collectors start calling.

There are a few common sense precautions to avoid Identity Theft: pay with credit, not debit; don’t respond to incoming emails or phone calls that fish for your info; ask for your free credit report on a quarterly basis.

And, of course, there are credit monitoring services, which make a buck by tracking your credit record.  The problem with credit monitoring services is that they actually make a LOT of bucks doing that.  Offers that I’ve received seem awfully pricey to me, averaging $15-$30 per month.  That adds up fast.

However, one little-mentioned option is Identity Theft Protection that can endorsed onto your standard Homeowner’s or Renter’s Insurance Policy.  Almost all insurance companies offer this protection as an add-on.  And it’s cheap; typical cost is $12 to $20 in additional premium.  Per Year. That’s more affordable than a credit monitoring service.

The coverage and limit of Identity Theft Protection varies by insurance company.  Usually, it’s limited to $25,000.  If the theft involves a credit card, your liability is limited by law; the real damage will involve your credit score and your lost time.  Identity Theft Protection may reimburse you for the time you spend trying to undo the damage.  The time that a victim spends writing letters and making phone calls (imaging the time spent on hold and navigating automated phone systems!) to credit companies, in an effort to clear their record, can amount to thousands of dollars of lost wages, and lots of frustration.  As part of the Identity Theft Protection, one of my insurance companies (Safeco) assigns a case manager to their insureds.  The case manager can help you, so that you can avoid frustration and lost time in an effort to undo the damage and get your credit history cleared.

Renters, who are often uninsured, can get Identity Theft Protection by purchasing a Renter’s Insurance Policy, and adding on the Identity Theft Protection coverage. 

Like Homeowners Insurance, a renter’s insurance policy covers loss to Personal Property (your “stuff”).  Since the dwelling itself is not covered (the landlord is responsible for insuring his building), the cost of renter’s insurance is very affordable, usually $150-250 per year on average.  In addition, most insurance companies will give renters a multi-policy discount on auto insurance, which could amount to real savings.  If you are a renter, you can protect your possessions and mitigate your losses in the event of Identity Theft, and reduce your auto insurance premium by qualifying for a multi-policy discount.  That’ll give you the confidence to keep swiping those credit & debit cards with style.