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Identity Theft Benefit Programs - They're Not Always What You Think

Posted on Dec 19, 2006 by Michelle Pastor

I just looked over the paperwork for some identity theft benefit programs for a client and what I found was pretty unsettling.

This particular client’s husband died 6 months ago and she was inundated by her bank and other companies offering her ID theft benefit policies.  She was told her that her deceased husband’s identity is now a prime target for identity thieves.  She was confused and thought that the program she signed up for actually prevented identity theft.  It’s impossible for any company to prevent identity theft, and although the literature never made this claim, it is a common misconception of those buying into such a program. 

By closing out all of her husband’s accounts and taking his name off their joint accounts she had already reduced the chances of becoming an identity theft victim, but she signed up because the program offered to cover fraudulent purchases on her credit cards.  She didn’t realize that she would only be out $50 for each card if an identity thief used them fraudulently.  Honestly, I have never known of a credit card company to actually charge the victim that $50, so my client probably wouldn’t even need this benefit, but she was paying $14.95 per month for it.
 
The plan covered other minimal benefits, but what really bothered me, was that the Identity Theft Reimbursement Plan excluded some very important items such as:

• Damages or Losses of any type resulting from fraudulent charges or withdraw of cash from a debit or credit card
• Damages or Losses of any type resulting from fraudulent withdraws from financial/bank/investment accounts

If I were to buy any type of ID theft benefit program, I would want it to cover these two losses.  What if an identity thief drains my bank account with my debit card or what if they make withdrawals from my investment account?  To me, those are two of the scariest scenarios of identity theft and that’s the kind of extra protection I would look for in a program.

If you subscribe to any of these programs, make sure that you understand what you’re paying for.  There are a number of banks and companies that sell their identity theft products by playing into ID theft fears, but they don’t offer a whole lot of service for the price.