ID Theft Insurance

Texas is the fifth highest state in the nation when it comes to identity theft, according to the Federal Trade Commission. It happens to one in 20 Americans. But now there's a way to protect yourself. It's called identity theft insurance, but is it worth the costs?

"By the time I called Monday morning, they had pretty much cleaned out my account," says Adam Troutman. Troutman has had his identity stolen twice since he's moved to East Texas. "You invest so much time and effort and eventually money into contacting utility companies, phone companies, telling them, you know, I'm going to pay my bill, but this is what happened."

Adam's not alone. Jay and Linda Foley's lives changed forever when Linda's boss stole her personal information and her identity and racked up thousands of dollars in bills. "It took roughly between twelve and eighteen months to completely clear everything." Once their financial mess was fixed, the couple opened "The Identity Theft Resource Center" to help the exploding number of victims.

The crime is now so common, it's the number one issue on the Federal Trade Commission's hit list. "In 2002, 43 percent of the consumer complaints received by the Federal Trade Commission were related to identity theft," says Joanna Crane, with the FTC.

Identity theft is a costly crime. On average, victims spend at least 175 hours and $1,000 in out-of-pocket expenses to clear their names. Can you protect yourself from financial devastation?

Madelyn Flannagan with the Independent Insurance Agents and Brokers of America believes you can. "Identity theft insurance provides protection for you in the event that your identity is stolen." One of the fastest growing types of insurance, ID theft policies, cost from about $25 to $150  a year. They're offered by some credit card companies, credit bureaus, and a handful of insurers.

But, before making the investment, read your policy carefully. Flannagan says you should look for a low deductible and reimbursement for lost wages. "People have to take off an enormous amount of time from work. It's very expensive." Other things a policy should cover: attorney fees and the cost of loan applications. "If your loan has been denied because of your identity theft, you're going to have to reapply."warns Flannagan. "Those three, $400 fees as you apply for loans can be very expensive."

But, Robert Hunter with the Consumer Federation of America says ID theft insurance is unnecessary. "Most people don't need it. It's basically nuisance coverage." The Consumer Federation of America says if you are going to invest in ID theft insurance, it should be on the bottom of your list, after health, auto, home, life and disability policies. "If you have limited resources and your insurance dollars are, therefore, limited, you shouldn't be spending on frill coverages."

But, Adam Troutman thinks the coverage would have helped him at a time when he needed it. "I think it's a great idea because I know that would have meant a lot."

With or without insurance, Jay and Linda Foley say it's important to remember, there's one part of ID theft no policy can cover. "Emotionally there's lasting damage. Linda will never trust people the way she did before this happened."

If you invest in identity theft insurance, it doesn't mean you can stop safeguarding your personal information. The FTC says be careful about giving out things like your social security number or mother's maiden name. It's also a good idea to put passwords on credit card and bank accounts to make it harder for an identity thief to make changes or take over your account.

Stephen Parr, reporting.