At Some Point, Will We All Buy ID Theft Insurance?

You might have heard about the article by Mat Honan published on Wired magazine a few weeks ago. I highly recommend reading it if you have not. Basically, he became the (very) unlucky victim of one or many very motivated and capable hackers that ended up among other things taking control of his email, his Apple account, wiping out his iPhone, iPad and MacBook computer, spamming his twitter list, etc. It’s a terrible story and one that made me think quite a bit. How bad could it be if someone was motivated (by financial or other motives) to take me down? Any person from a computer, no matter where he/she is located has the power to do so.

We Are Becoming Very Vulnerable

A few years ago, we might have had an email, a few passwords, etc. But these days, we often have our whole life in our phone, we do our banking online, are active on social media, some of us (me!) have online businesses, etc. Just last year, a website that I had been a member of, Stratfor, was hacked and the hackers decided to publish their findings online.

You can imagine how I felt seeing my name, address, phone number and credit card info published for all to see

One morning, I woke up and found a very public file that had my name, email, password (for that site), address and phone number as well as full credit card information (#, expiration date, 3 digit security code, etc). It was all there for anyone to see or exploit. I’ve been a big fan of moving my data, photos and more to the clouds and while it’s incredible convenient, it’s also a bit scary to know that are our society becomes increasingly connected, we become very vulnerable to hacking, identity theft, etc.

Just imagine having your entire medical history displayed for anyone to see because your hospital was “hacked”….

Is It A Big Enough Problem?

While this number is constantly going up, the most recent study I could find was that in the US, between 8-11 million people become victims every year at a cost of $38-54B. Obviously, it’s difficult to be very precise with these numbers but I think it’s fair to say that identity theft is a big problem that we need to take very seriously.

How Can I Protect Myself?

1-Keep all of your personal papers locked up at home.
2-Shred all old bills and documents that you no longer need.
3-Don’t carry any personal identification documents that don’t need (SS card, passport,etc) on your person or in a bag or purse.
4-Only provide personal identity information when there is a clear and compelling need to do as such
5-Review your credit report at least once a year and take note of any unusual charges or unexplained accounts.
6-Limit access to your home. This includes not throwing a lot of parties, inviting only people that you really KNOW to your home and staying close when contractors and tradespeople are working in your residence.
7-If you have relatives or friends who have alcohol, drug and gambling problems, keep a close eye on them and their actions. Most ID theft cases are caused by people who you know and that you thought you could trust.
8-Keep an ID protection service to help monitor your credit like Identityguard While it will cannot guarantee 100% protection, it will help it your ID is stolen and will offer protection against fraud.
9-Make copies of everything in your wallet to report to the police in case your wallet is ever lost or stolen.

What Costs Occur When You Are A Victim Of ID Theft?

Unfortunately, as obvious as it sounds to most victims, fixing things is often much more difficult that you can imagine. The main expenses are often legal fees as you defend yourself against either criminal charges or try to avoid expenses that occurred. You might also need to miss work, hire a notary, etc.

Is It Worth It?

There are certainly a few different things to consider. First off, is there a deductible? Obviously, what is covered? If legal fees are not covered, it is a bit pointless right? It’s also possible that for example as an American Express cardholder, you already own some ID theft protection. It’s also important to note that any money that was taken from you will NOT be covered in most policies (you likely/hopefully have insurance with your credit card, bank, etc).

In the end though, while I’m sure that ID theft insurance will catch on and improve over time, especially as the cost and consequences of ID theft increase, right now it is one of those types of insurance that I would probably try to stay away from. Why? The cost-benefit analysis is simply not compelling enough right now for me. I will instead focus my time and money on preventing this (as much as possible) from happening in the first place.

Have any of you had experience with ID theft? Or ID theft insurance?

1 Comment

September 12, 2012, 7:38 am

[…] (which thankfully I was not using on other websites). Wow. I had a moment of panic. I did not have ID theft insurance or any other type of protection for that matter. And so did thousands of others that had been […]

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