Identity theft prevention insurance: Is it worth your money?

Are ID theft prevention services worth it? Don't be fooled. While they may offer protection, they can't prevent identity theft from happening, Ross McLaughlin reports.

The world has gone digital and that includes our personal information. Capital One suffered a major data breach three weeks ago, affecting the sensitive data of 100 million Americans and six million Canadians.

With these data breaches comes the risk of identity theft, but ID theft prevention services claim they can protect your sensitive data. In reality, ID theft prevention services offer more damage control than prevention. But how do they work and most importantly, is it worth your money?

Andrea Ferrero knows a thing or two about identity theft. A few years ago her identity was stolen, and she now teaches young people about finances, including what to know about identity theft.

But she was luckier than most. Ferrero had enrolled in an identity theft protection service, which quickly informed her that someone used her information to obtain a large amount of credit in her name.

“They walked me through the steps to take to dispute the line of credit that had been opened and take care of that,” said Ferrero.

But before you enrol in one of these services - stop.

Experts caution you to know what you’re buying first. People might believe that ID protection services will help prevent identity theft in the first place, but experts say that’s not true.

“Consumers pretty much have to accept that criminals can get their hands on your personal information no matter what you do. The key is to spot fraudulent activity quickly and then do what you have to do to stop it,” said Margot Gilman, Consumer Reports money editor.

ID theft protection services can help you dispute fraudulent transactions with your bank, credit card companies and other businesses after your identity has been stolen, usually for a monthly fee.

These services can also alert you if your identity has been stolen, but it can’t prevent someone from stealing it in the first place.

So how can you avoid becoming a victim?

First, assume that your information is already on the dark web in the hands of criminals. While ID theft services can determine if your information is on the dark web, they can’t remove it.

Secondly, take initiative.

In the United States, a consumer can freeze their credit with major credit bureaus Equifax and TransUnion for free. Thus means that no one will be able to open credit, including you, until you unfreeze it.

This service, however, is not available in Canada. Equifax and TransUnion offer identity theft prevention plans and credit monitoring, but it costs between $12 and $30 per month, depending on your plan.

Also keep in mind that freezing your credit won’t prevent all forms of identity theft. A criminal can still use your personal information to get medical services or steal your tax refund.

“It’s critical that consumers themselves keep a careful eye on their financial world -- bank and credit card statements obviously, but also medical records, insurance records, tax records,” said Gilman.

ID theft services might also offer limited reimbursement for stolen funds, but it’s usually second to anything your financial institution will offer.

Experts say if you’re thinking of signing up for ID theft prevention, first ask a lot of questions. Some companies will help you through the process, but others cover very little or they might only give you a do-it-yourself repair checklist.

Don’t give out personal information through the mail, phone or online unless the call is legitimate. Review your credit reports yearly and banking statements frequently for signs of suspicious activity, and report any cases of fraud to the Canadian Anti-Fraud Centre.

You should also shred documents, keep tabs on your social insurance number, birth certificate and mail. Finally, watch your online footprint, use strong passwords for your accounts and don’t overshare on social media.