Identity Theft Protection: Weighing the Costs and Benefits
Identity theft protection companies promise to act as guardians of your personal information, offering services for a monthly or annual fee. They generally begin with credit monitoring, adding features to alert you to potential problems. However, are these services worth the investment, or can you secure your identity independently?
Understanding the Services Offered
In general, identity theft protection companies provide three fundamental services:
- Monitoring: These companies scrutinize your credit files and alert you to activity such as new accounts opened in your name and credit inquiries, enabling swift action.
- Alerts: They notify you when your personal information is used, for instance, if someone attempts to open a bank account in your name. This is crucial, as many individuals remain unaware of identity theft until their credit is damaged, bank accounts are depleted, or they unexpectedly accrue new debt.
- Recovery: When someone misuses your information, these companies assist with recovering lost funds and repairing credit damage. Most offer insurance policies up to $1 million.
Many also provide related services, such as alerts about identity theft news and local sex offender registries. Some monitor dark web sites known to traffic in stolen personal and financial data, a service you can’t typically perform yourself.
The Limitations of Alerts
The primary function of alerts from these services is to flag you after the fact. Unfortunately, they can’t prevent someone from stealing and misusing your financial data. They can, at best, only inform you of activity after it has occurred.
Proactive Measures: Freezing Your Credit
NerdWallet suggests a more proactive solution: freezing your credit, which can prevent the opening of fraudulent accounts. This method can stop identity theft before it starts.
Exploring Identity Theft Protection Services
Let’s examine some popular identity theft protection services:
Aura
Pros:
- Extensive features, including VPN and antivirus protection for multiple devices.
- Offers an Experian credit lock.
- Family plans support up to five adults and an unlimited number of children and devices.
- All plans include a 14-day free trial, and annual plans have a 60-day money-back guarantee.
Cons:
- Does not monitor social media accounts.
- Annual plan cancellations beyond 60 days still require full-year payment (with continued access).
Cost: Individuals: $12.99/month (monthly plan) or $119.88/year (annual plan), including three-bureau credit monitoring. Couples: $19.99/month or $215.88/year. Families: $47.99/month or $299.88/year.
Best for: Budget-conscious individuals or larger families.
LifeLock Ultimate Plus
Pros:
- The top-tier plan includes social media monitoring and three-bureau credit monitoring.
- Offers a $1 million identity theft recovery plan and investment account alerts.
Cons:
- The top-tier plan is expensive.
- Annual plan rates increase after the first year at auto-renewal.
- LifeLock notified customers of a 2023 data breach affecting nearly 1 million users.
Cost: Coverage for two adults: $41.99/month. Discounts available for annual payment ($34.99/month for two), but the cost increases after the first year.
Best for: Those without a large family to protect and who can afford comprehensive coverage.
IDShield
Pros:
- Simple, clearly defined services and pricing, with no tiers.
- Unlimited consultations with an identity theft expert.
- Scans social media posts for reputational risk.
Cons:
- Reliance on the service can lead to complacency in account monitoring.
- Multiple alerts can lead to overlooked important information.
Cost: Three-bureau credit monitoring: $19.95/month (individual) or $34.95 (family plan).
Best for: Price-sensitive customers who want social media scanning.
IdentityForce UltraSecure+Credit
Pros:
- Offers a comprehensive range of features.
- Includes dark web monitoring and credit activity monitoring for children under the family plan.
- Provides advanced alerts for suspected fraud.
Cons:
- VPN or mobile device protection options are predetermined.
- Website information can be overwhelming (navigation links are helpful).
Cost: $39.90/month or $399.90/year (individual) for the UltraSecure+Credit plan. Family plan: $24.90/month or $249.90/year.
Best for: Individuals seeking advanced fraud monitoring.
ID Watchdog Premium
Pros:
- Simplifies credit monitoring, alerts, and recovery.
- May assist with recovering from pre-existing identity theft (additional fee applies, based on incident details).
- Family plan allows for a second adult and up to four children.
Cons:
- Equifax acquired ID Watchdog in 2017, the same year Equifax experienced a significant data breach.
- Lower mobile app ratings compared to competitors.
Cost: $21.95/month or $220/year (individual) for three-bureau credit monitoring. Family plan: $34.95 monthly or $350 annually.
Best for: Individuals needing assistance with existing identity theft situations.
DIY Identity Protection: Taking Control
You can perform the basic services offered by identity theft protection companies yourself, often at no charge:
- Monitor your credit reports: Keep an eye on changes and get a free credit score through NerdWallet.com.
- Report identity theft: Follow free recovery paths outlined by the federal government at IdentityTheft.gov.
- Freeze your credit: Freeze your credit files at all three major credit bureaus (Equifax, Experian, and TransUnion) for free, something that identity theft protection companies cannot do for you.
“The first thing consumers need to do if they’re worried about ID theft is just to freeze their credit reports,” advises Chi Chi Wu, senior attorney at the National Consumer Law Center. “Freeze, freeze, freeze. Everything else is gravy on top of that.”
Are Identity Theft Protection Services Worth the Investment?
Ultimately, the decision depends on individual needs and preferences.
You might opt for a comprehensive protection suite if you value peace of mind and are willing to pay for it, or if you know you’re unlikely to monitor your credit yourself.
If so, compare prices and coverage details diligently. Ensure that your chosen plan monitors credit data at all three credit bureaus for proper protection. Steer clear of credit monitoring products offered by credit bureaus, as these often lack robust coverage.
However, if you are proactive, taking steps like freezing your credit and regularly checking your reports provides adequate protection at no cost.
Consider a paid identity theft protection service if you:
- Are a victim of identity theft or are at high risk.
- Are unwilling to freeze your credit reports.
- Know you will not actively monitor your own credit.
