Identity theft is the act of taking someone’s personal information and using it to impersonate a victim, steal from bank accounts, establish phony insurance policies, open unauthorized credit cards or obtain unauthorized bank loans. In some more elaborate schemes, criminals use the stolen personal information to get a job, rent a home or take out a mortgage in the victim’s name.
Close to half of identity theft cases are the result of a lost or stolen wallet, checkbook, credit card or other physical document. But as online shopping becomes increasing popular, it can also pose an identity risk.
Victims of identity theft are often left with lower credit scores and spend months or even years getting credit records corrected. They frequently have difficulty getting credit, obtaining loans and even finding employment. Victims of identity theft fraud often travel a long and frustrating road to recovery; depending on the severity of the identity theft fraud damage, the recovery process can take anywhere from a few weeks to several years.
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 companies now include coverage for identity theft as part of their homeowners insurance policy. Check your policy to find out. Others 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 that will guide you through the process of recovering your identity.
Use of stolen credit card numbers is among the most common forms of identity theft, but some schemes use electronic means, including online scams like ‘phishing’, in which thieves use email inquiries purporting to be from financial or other online organizations, to obtain sensitive account information. Others might use more old-fashioned methods, such as ‘dumpster diving’—rooting around in people’s garbage to collect financial information.
Many credit card companies are now using radio-frequency identification (RFID) chips in their credit cards instead of magnetic stripes. The advantage is quicker, more efficient transactions, especially those carried out at traditionally cash only retail outlets, such as fast-food restaurants or convenience stores. However radio frequency identification may make it possible, in some cases, for identity thieves to use a simple electronic device to capture the information. The scariest part is that it can happen right in your presence, without you even knowing it.
In order to make it more difficult for identity thieves to open accounts in your name, you can also contact the fraud department of any of the three credit reporting agencies to place a fraud alert on your credit report—by law, the agency you contact is required to contact the other two agencies. The fraud alert tells creditors to contact you before opening any new accounts or making any changes to your existing accounts. The three major credit bureaus are Equifax, TransUnion and Experian.
If you are the victim of a crime, report it to the credit card company and police immediately. Ask for a copy of the police report. You will need it if you want to file an insurance claim or report the crime to the FTC for their assistance. Victims of identity fraud can contact the FTC online or at 877-IDTHEFT.
The following companies offer identity theft insurance some as part of a homeowners policy, some as an endorsement and some as stand-alone coverage: