By Richard A. McGrath, CIC, LIA
You hopefully know how important it is to insure your most valuable possessions, such as your home, your car and your jewelry. But what about your most valuable possession of all – your identity?
Identity theft insurance is becoming more popular because identity theft is becoming more common. The 2013 Identity Fraud Report from Javelin Strategy & Research found that identity thieves stole more than $21 billion from 12.6 million U.S. victims of identity fraud in 2012. That’s up from less than 10 million victims in 2010, when we last wrote about identity theft.
Identity theft insurance, which covers expenses incurred when victims of identity theft try to regain control of their identity, is an inexpensive way to cover the cost of damages. It typically provides up to $15,000 in coverage, but it’s also important to take action that will prevent identity theft.
Identity theft is sometimes beyond your control, because it often results from corporate data breaches. If your bank, your employer or another business that has your personal information is the victim of identity theft, so are you.
However, there are also many cases of identity theft involving individuals. The more you know about how identity theft occurs, the better you can protect yourself.
The National Association of Insurance Commissioners defines identity theft as taking place when someone other than you uses your personal information, such as your Social Security number, with the intent to commit fraud or to aid in an unlawful activity. Your personal information may be used to open new credit card or bank accounts in your name, to write bad checks or to take out a loan.
While sophisticated computer hackers are sometimes responsible, identity theft often results from simple theft of a person’s wallet, mail or computer. Consider just of the few common forms that identity theft takes:
Phishing. An e-mail that looks and sounds official is sent. It may say that potential fraud was detected in your account. Then it will ask for personal information, such as your Social Security number or credit card number.
The e-mail may even claim to be from the Internal Revenue Service. Note that the IRS and just about any legitimate business in the U.S. will not ask for confidential information via e-mail.
Pharming. This is a variation on phishing, but an entire Web site is created that appears to be legitimate, even though it’s not.
Rootkits. A rootkit is a collection of tools designed to gain control of a computer. The rootkit is hidden. If the computer with the rootkit is part of a network, a hacker can gain access to the entire network using the rootkit.
Dumpster diving. Some identity thieves look through trash for credit card and loan applications, and documents containing Social Security numbers.
Shoulder surfing. If someone is looking over your shoulder at an ATM machine, the person is likely shoulder surfing to capture your PIN number.
Hacking. Hacking is breaking into computer networks to gain access to company data files. Financial institutions, retailers and credit card transaction processing companies are common targets.
Stealing. Taking a person’s wallet used to be the easiest way for thieves to gain access to sensitive personal information. Now, thieves may also target mail boxes, where they might find newly issued credit cards, bank and credit card statements, pre-approved credit offers, investment reports, insurance statements, benefits documents or tax information.
Acting. Some people have successfully obtained credit reports by posing as the victim’s employer, loan officer or landlord.
Preventing Identity Theft
Given the many variations of identity theft, there is, of course, no one way to prevent it. The most important thing to remember is that you should never give your Social Security number, credit card numbers or other personal information to anyone, unless you’re conducting a secure transaction with a reputable business.
Other steps that will help include the following:
Keep a close eye on your mobile phone, tablet and laptop. If you’re using wi-fi in a hotel, airport, coffee shop or elsewhere, another user on the same network can easily hack into your computer.
Shred all unwanted credit card offers and papers with personal information on them, and keep all personal papers and checks locked away.
Be careful who you let into your home – cleaners, house sitters, baby sitters, handymen and others may be seeking access to your personal information. Family members, relatives, friends and neighbors are frequently responsible for identity theft, so be careful about allowing anyone access to areas where your personal information is kept.
If your mail carrier picks up mail from your mailbox, be careful not to leave any mail there that has personal information. Drop it into a mail box.
Never have your Social Security number printed on your checks or your driver’s license. Do not keep anything with your Social Security number on it in your wallet. When you’re paying off credit card debt with a check, never write the full credit card number on the check – only the last four digits.
If you bank or pay bills on the Internet, monitor your accounts regularly. You may want to use a credit monitoring service or at least check on your credit report regularly.
You can receive a free credit report annually from Equifax, Experian and TransUnion by going to their sponsored Web site at annualcreditreport.com. By using all three services, you can get an updated report as frequently as every four months.
Avoid using debit cards, which can give an individual access to your credit card. Photocopy all of your credit cards, health cards and other information you keep in your wallet in case your wallet is stolen. Keep the copies in a safe place.
Make certain your computer has a firewall, anti-virus and anti-malware software.
Never reply to suspicious e-mails or to e-mails that ask you for personal information, even if they look legitimate.
Never have your credit card, PIN number or other personal information visible to strangers. If you give your credit card to a store clerk, for example, be certain that no one else is in a position to take your number. If you’re at an ATM, cover your hand, so that no one can see you entering your number.
Companies are becoming increasingly sophisticated in the way they prevent or fight back against identity theft, but identity thieves are also becoming more sophisticated in the way they carry out their crimes.
You can’t always prevent identity theft, but if you take action to prevent it, your probability of being an identity theft victim will be much lower.
Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass. He can be reached at firstname.lastname@example.org.
This article is written for informational purposes only and should not be construed as providing legal advice.