The 'Million Dollar' Question

Besides setting alerts, some services obtain your credit report and ask the bureaus to stop selling your info to credit card companies--two things you can do on your own (see "DIY Identity-Theft Protection"). Identity Guard and TrustedID will scan the Web and tell you if someone is trading your info online; but the odds of catching anyone are virtually nil, says Dmitri Alperovich, director of intelligence analysis for Secure Computing.

"This type of claim is mostly a gimmick," he says. "You might find a few credit card numbers by searching the Net, but most of them aren't lying around for public viewing, and the people who have them won't deal with you unless you're also a criminal."

LifeLock, LoudSiren, and TrustedID provide million-dollar guarantees against identity-theft losses, but that promise comes with some strings attached; LifeLock says that it will hire specialists to contact lenders and law-enforcement agencies for you, and will pay other direct costs up to $1 million. However, the guarantee doesn't define which costs LifeLock considers "direct," nor does it specify which costs are covered below the million-dollar cap.

TrustedID promises to pay the cost of reestablishing your identity, reimburse your legal fees, and restore up to $5000 in lost income. LoudSiren covers theft losses, attorneys' fees, and lost wages, with no cap. Debix's $25,000 policy covers expenses, attorneys' fees, and up to $2000 in lost wages.

But a million dollars is an inflated amount anyway. According to Javelin, the average out-of-pocket cost for identity theft victims in 2007 was $691, and the average loss for people who had false accounts opened in their names was $1066. Regardless, most victims of financial fraud don't pay anything out of pocket because the financial institutions typically bear the costs, notes Rachel Kim, an associate analyst at Javelin.

TrustedID's Mitic acknowledges the unlikelihood that anyone will need a million dollars of coverage. The real advantage, as he sees it, comes from having experts who can take the hassle and pain out of restoring customers' identities.

"I think the biggest benefit customers get from TrustedID's warranty is our restoration services--our commitment to hold a customer's hand, do everything and anything they need to help them put their lives back together again," Mitic says.

According to Prusinski, only 41 of LifeLock's 840,000 subscribers have ever needed its restoration services. Mitic declines to release TrustedID's customer numbers, but he estimates that 1 out of 10,000 need their identities restored. Debix's Fergerson says that just 9 of its 300,000 subscribers have filed insurance claims; in most cases the theft had happened before the customer signed on to the service.