Money tip #122 – Avoid taking out identity theft insurance
I'd be surprised if your bank or credit card company haven't tried to flog you either identity theft protection insurance or card protection at some point. But with the cost of these policies ranging from £30 to £70 per year is identity theft insurance worth it?
Why identity theft insurance might not be worth it
Here are a few reasons why identity theft insurance is rarely worth paying for:
- You are already protected under current banking rules - Policies often offer large levels of cover for losses incurred as a result of ID theft. However, as long as the fraud didn’t occur as a result of your negligence then you are covered under the current Banking Conduct of Business rules and the Lending Code. Under these rules you will only be liable for up to £50 of your losses, which is often less than the excess on the ID theft insurance policies!
- Pointless credit checking service - Some policies offer a credit report checking service with subsequent alerts sent to you should the information on your record change. But you can do this yourself for free! So why pay for such a pointless service? See my post Money tip #10 – Check your credit report for more details on how to do it yourself.
- Sneaky exclusions – Like all insurance policies ID theft insurance can be full of hidden exclusions. For example, some policies may not cover you for cash contained in a stolen wallet. So unless you check the small print you might not be covered for what you think you are.
- It's expensive! - Plain and simple
Prevention is better than cure
As with a lot of things in life prevention is better than cure. So for advice on how to avoid becoming a victim of ID theft read my article Money tip #9 – Protect yourself from ID theft.
But if you do become a victim of fraud, which can happen to us all, then my articleHow I became the victim of card fraud and what I did about it should help.
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