Identity theft insurance has grown more popular with consumers as criminals continue to find innovative ways to steal personal information, according to the Insurance Information Institute (I.I.I.).
Identity fraud is defined as the unauthorized use of another person's personal information to achieve illicit financial gain, said Javelin Strategy & Research, which reported a 13 percent increase in this type of illegal activity in 2011.
"A healthy fear of ID theft is a good thing," stated Gail Cunningham, vice president, Membership and Public Relations, for the National Foundation for Credit Counseling (NFCC). "People often become complacent, particularly with their mobile devices. When people see their wallet, credit cards or checkbook, they think of money. However, they don't connect the dots that critical financial information may be stored on their smart phone, thus putting them at significant risk if it is lost or stolen."
Most homeowners and renters policies provide coverage for theft of money or credit cards; however, the amount of coverage is limited (usually $200 in cash and $50 on credit cards). Once you have reported the loss or theft of your credit card to the issuing company, you are responsible for only $50 of unauthorized use.
Some insurers now include coverage for identity theft as part of their homeowners insurance policy. Other companies sell it as either a stand-alone policy or as an endorsement to a homeowners or renters insurance policy, which can run about $25-$50 annually. Identity theft insurance provides reimbursement to crime victims for the cost of restoring their identity and repairing credit reports. It generally covers expenses such as phone bills, lost wages, notary and certified mailing costs, and sometimes attorney fees (with the prior consent of the insurer). Some companies also offer restoration or resolution services to guide you through the process of recovering your identity. An insurance professional can help you find out what kind of coverage you may already have or offer details on what additional coverage you need.
"Victims of ID theft are often left with lower credit scores and spend months getting their credit records corrected. They also frequently have difficulty getting credit, obtaining loans and even finding employment," said Michael Barry, vice president, Media Relations, at the I.I.I.
The I.I.I. offers following tips to help protect your identity:- Keep the amount of personal information in your purse or wallet to the bare minimum. Avoid carrying additional credit cards, your social security card or passport unless absolutely necessary.
-Guard your credit card when making purchases. Use your hand as a shield when using ATM machines or making long distance phone calls with phone cards.
-Always take credit card or ATM receipts. Do not throw receipts into public trash containers, leave them on the counter or put them in your shopping bag where they can easily fall out or get stolen.
-Proceed with caution when shopping online. Make sure you are buying from a reputable, familiar retailer with a secure network. And never buy anything online from a site that does not have SSL (secure sockets layer) encryption installed--at the very least. You will know if the site has SSL because the URL for the site will start with HTTPS:// (instead of just HTTP://).
-Monitor your accounts. Do not rely on your credit card company or bank to alert you of suspicious activity. Carefully monitor your bank and credit card statements to make sure all transactions are accurate. If you suspect a problem, contact your credit card company or bank immediately
-When entering names, numbers and addresses into your electronic device, keep them as generic as possible. Include only as much information as is necessary, and never use monikers like "Hubby," "Sweetheart," "Best Friend," or "Mom and Dad." Do not store important social security or banking information on your PDA or cell phone--if it is stolen, the thief will have all the necessary information to use your identity.
-Place passwords on your credit card, bank and phone accounts. When creating a password, avoid using easily available information like your mother's maiden name, your birth date, any part of your social security number or phone number, or any series of consecutive numbers.
-Do not give out personal information. Whether on the phone, through the mail or over the Internet, do not divulge sensitive information or your social security number unless you initiated the contact, are familiar with the person or company and are confident that they have a secure line.
-Shred, shred, shred. Tear or shred any documents that contain personal information such as credit card numbers, bank statements, charge receipts or credit card applications, before disposing of them.