Identity Theft

A friend of mine got a letter in the mail in 2006 telling her she owed money for a department store bill that had gone unpaid for several months. For our purposes, we’ll say her name is Kathleen Robinson. The letter came addressed to Katherine Robinson; but when she inquired and told them the first name is different, they read her the credit card number. Yup, same number. She informed them that they weren’t her charges and the store did not pursue it. Weeks later she received a phone call from a collection agency. Apparently, someone owed money on a gas credit card that had been taken out in her name. She didn’t have a gas card. Subsequently, the garbage company threatened to stop collecting her trash. It had become apparent to her that someone had stolen her identity. How does this happen and what can you do about it?

How it Happens

Identity theft occurs when someone gets your name, address, credit card number (with or without the card itself), possibly your social security number or other personal information, and uses them to open accounts, charge merchandise, and run up big bills by pretending they are you. They don’t pay the bills, leaving you with collection agencies calling and your credit in ruins. It’s a nightmare and very difficult to correct and reverse the damage.

It’s quite easy how it happens actually, and a wonder that it doesn’t happen even more frequently. Think about the information you give out to people every day. Have you ever given your credit card to someone and shown your driver’s license with your address on it for identification? Of course; we all do it. At a minimum, we share this information at stores and restaurants all the time. Any one of those sales people or store clerks or waiters or cashiers could pocket your number for their own purposes and use it to charge merchandise, apply for other credit, and simply pass themselves off as you. Even when you pay your rent by check and put your driver’s license number on it, your landlord could use (or sell) that information.

This article is not to make you paranoid and believe everyone is out to steal your identity for financial gain, but it is to make you aware that this does happen and how you can protect yourself. (Also see “What Is Identity Theft and How Does It Happen?”.)

How You Can Protect Yourself

You can’t protect yourself completely, but there are some things you can do to reduce the likelihood that someone will steal your identity. If it does happen, a little planning in advance will help you cover your losses.

Tips to protect yourself:

You would be wise to only carry the information with you that you absolutely need for day-to-day dealings. For example, don't carry that platinum credit card with $50,000 limits to the supermarket.

Try to collect your mail as soon as the mailman drops it off, or get a mailbox with a lock. One of the easiest ways for a thief to get your personal information is by stealing your mail. If you don’t receive your credit card bill on time, call the company and find out why. It may have been stolen out of your mailbox and by the time you find out, some hefty charges may have been made.

Shred documents that you no longer need to keep. Don’t simply put old credit card statements into the trash or recycling bin. Thieves will go through garbage to get your personal data.

Ask why someone needs your personal information before you give it to them. Don’t just give it automatically. Never give an individual or a company your personal information if they just call you or email you out of the blue, even charitable organizations. Have them send you their request in the mail.

Don’t fall for online scams. Take to heart the old adage--if it sounds too good to be true, it probably is. If there’s no way to contact the company offline to see if they are legitimate, forget it. Don’t give them any information about yourself.

If you store personal information on your computer, keep it safe. Use a personal firewall and current anti-virus software.

Don’t post personal information online in any chat rooms, bulletin boards, on instant messaging, or on your Facebook or My Space pages. You never know who may be reading it.

Use good passwords on your computer. Give up on the obvious family birthdays and pet and children’s names. Make them lengthy and combine letters and numbers; then rotate your passwords regularly.

Place a fraud alert on your credit reports. It’s a good idea to contact these three credit bureaus: Equifax (800-525-6285, www.equifax.com); Experian (888) 397-3742, www.experian.com); TransUnion (800) 680-7289, www.transunion.com). From each credit bureau, get a copy of your report. Victims of fraud can usually get their report for free. Request in writing that no new credit is granted without your approval. Also in writing, ask that your account be flagged with a fraud alert tag and a victim’s statement, which you should provide. Keep a copy for yourself. When you get your reports, go over them thoroughly and check for any inquiries you didn’t initiate, accounts you didn’t open, and any unexplained debt.

Contact the proper authorities. You can report the theft by calling the Federal Trade Commission’s (FTC) toll-free Identity Theft Hotline at (877) ID-THEFT or (877) 438-4338. Counselors there can advise you on how to deal with the credit-related problems that can result from identity theft. File a report with your local police department, as well.

Buy identity theft insurance—plan for the possibility

Many insurance companies sell identity theft insurance these days to provide reimbursement to victims for the cost of repairing credit reports and restoring one’s identity. Some insurers include it under homeowners’ insurance, and others sell it as either a separate, stand-alone policy or as an endorsement to a homeowners’ or renters’ insurance policy.

These policies are not inexpensive. They average about $25 to $50 for up to $25,000 worth of coverage. They provide compensation for phone bills (for all the phone calls you will have to make), lost wages, (for all the time you will have to spend), notary and certified mailing costs, (for all the letters you will have to mail) and sometimes even attorney’s fees should you require legal assistance.

Which insurance companies sell identity theft insurance?

Below are the companies that currently offer identity theft insurance. Not every company sells this insurance in every state. Where we have a review of the company on this site, click on the link next to the insurance company name. They are all in the section called Insurance Company Reviews. Each review will tell you in which states that company does business, the company rating from A.M. Best and a company overview.

Allstate Insurance (See “Allstate Insurance”)

American International Group (See “AIG Insurance”)

Chubb Group of Insurance Companies (See “Chubb Insurance”)

Encompass Insurance

Erie Insurance (See “Erie Insurance”)

Farmers Group, Inc. (See “Farmers Insurance”)

Fireman’s Fund (See “Fireman's Fund Insurance”)

Liberty Mutual (See “Liberty Mutual Insurance”)

Metlife (See “Metropolitan Co.”)

Nationwide (See “Nationwide”)

Travelers Insurance (See “Travelers Insurance”)

West Bend Mutual (See “West Bend Mutual”)

If you have other questions about these insurers or about identity theft insurance, contact either a local or online insurance broker or your state’s department of insurance for further assistance.