With more of us worried about identity theft than ever, banks and other companies now offer to protect your details in exchange for a fee. We discuss whether this insurance is worth the extra outlay or whether you're better off protecting yourself.
Identity theft, though a relatively new phenomenon, is becoming a major concern nowadays. If your identity was ‘stolen’, the consequences would be costly to say the least – the identity thief would be able to use your personal details to apply for credit in your name, effectively taking money straight out of your pocket and tarnishing your credit history at the same time.
In response to the increase in ID fraud as well as the growing public fear of becoming a victim of the crime, many financial providers now offer a new kind of ‘identity theft protection’. This involves providing you with cover that you can call on in the case of an identity emergency, in exchange for a monthly fee. But is this extra protection really worth purchasing?
What's included in identity theft protection?
Identity theft protection is a way for some financial providers to reassure us that they are on our side when it comes to identity fraud, fighting against the common enemy by offering extra protection of our details. This often but not always includes some of the following features.
Insured identity
Typically if you purchase an ID protection policy you’ll be given insurance to cover the cost of restoring your identity if you are a victim of the crime. This could cover expenses such as legal fees, or replacing your salary if you have to take time off work. Your credit card bill should also be covered if you are the victim of fraud.
Expert help
If you begin to suspect that you may be a victim of ID fraud, your bank will provide you with an ‘identity theft expert’ who will give you guidance and support in the event of your details being stolen.
Access to your credit report
As well as allowing you to view your credit report online any time you like, your bank will send you alerts by email or text message letting you know if there has been any suspicious activity in your name. This can help you keep tabs on your credit rating and make sure no-one is attempting to steal your identity.
Document registration
Important documents such as your passport and driving license will be registered by your bank so that if they’re lost or stolen, the details will be on record. They’ll also offer to replace a stolen or lost passport or driving license.
The cost of this identity theft protection usually comes to around £6-£10 per month.
Is it worth it?
£10 per month may not sound like much, but it’s worth considering the overall cost (£120 per year for as long as you keep up the cover) and whether it’s really worth committing yourself to this expense - or if you would be better off taking your own preventative measures to protect yourself against identity fraud.
First of all it’s possible to get your own free credit report through Experian or Equifax, or for a small fee with Callcredit.
By doing this you can provide yourself with the same benefits offered by banks’ identity protection. You’ll be able to check your credit report any time you like as well as arrange to receive email or text alerts if there is suspicious activity on your account. It’s worth noting however that although this is a free service at first, Experian and Equifax will begin to charge you for the service after your 30 day free trial. You can however pay nothing if you cancel before your free trial is up.
Likewise you can note down your passport and driving license details yourself and ‘keep them on record’, protecting yourself in the same way as banks offer to with identity protection. In the event that your passport or driving license is lost or stolen, you will then have the details to hand. You can report a stolen passport and stolen driving license at the Direct.gov website.
It’s worth noting that a replacement passport costs about £72, and a new driving license would set you back £17.50. Though this isn’t a cost you would want to have to meet, it’s worth considering whether it’s really worth paying out up to £100 per year to cover the relatively unlikely event of your documents being lost or stolen. Plus if you have contents insurance these documents should already be covered in the event they’re lost or stolen.
When deciding whether to take out identity protection, another important point to take into account is that this kind of insurance doesn’t actually offer you any kind of protection against financial loss as a result of identity theft. If you were the victim of identity crime and had £1,000 stolen from your account, identity protection doesn't usually stipulate that it would cover you for this loss.
However, it is worth noting that banks should reimburse you for money stolen from your account, whether or not you have purchased identity protection. You can also help yourself by always checking your current account and credit card statements to look out for any transactions you don’t recognise.
What’s more, if you are the victim of identity fraud your bank would be expected to offer you guidance and support in any case – whether it’s from an ‘identity theft expert’ or not.
What should I do?
It’s a good idea to think about how likely you are to claim on this kind of insurance, and whether the annual extra cost is outweighed by the protection your bank will provide you with.
If you anticipate that you would struggle to meet the costs of replacing documents and forking out legal fees in the unfortunate and somewhat unlikely event of becoming an ID fraud victim, paying a monthly premium for your bank’s protection may be worth it. Remember however to check your home insurance policy to see if your valuable documents are already covered.
In many cases you’ll be better off taking your own preventative measures and protecting your identity yourself, instead of handing over more money to your bank for protection you can arrange yourself.
