Are Identity Theft Protection Services Worth It?

Every year, there seems to be some massive credit card hack at a retailer. The two biggest in recent memory were when thieves stole credit and debit card data from 40,000,000 people who shopped at Target in 2013 and 50 million from Home Depot shoppers in 2014.

In each case, affected customers were given free identity theft protection services from one of the big companies – Lifelock, Identity Guard, or Identity Force.

While it feels good to get something free after you've had your information stolen, is it really worth it?

What These Services Offer

Identity theft is a big problem but do services like Lifelock and Identity Guard work? Are they worth it?There's no way to protect you from having your identity stolen.

What they offer is “constant” monitoring of your credit reports so they can catch the symptoms of identity theft as early as possible. They look for suspicious activity, like unauthorized credit pulls that might indicate someone is opening up a credit card in your name, and alert you.

By catching issues as early as possible, repairing them becomes much easier and faster.

A few years ago, something suspicious happened to me and my credit report. Someone had used a similar social security number to mine to get a cell phone. There wasn't any identity theft but it was curious because a second Social Security Number, a new address, and a credit pull appeared on my credit report. I didn't detect it until much later but an identity theft protection service would've seen these (as anyone looking would) as being strange and alerted me.

Are They Worth It?

We took a closer look at the LifeLock service as well as Identity Guard. We realized that those companies offer identity theft monitoring capabilities you can do yourself (if you are so inclined). You can get a very close approximation by using the Waterfall Method in requesting your credit reports.

The one thing that cannot be done for free is the, typically $1 million dollar, insurance plan. With Lifelock, for example, you get a laundry list of benefits if you're the victim of identity theft:

  • Replacement of documents – the cost of replacing documents, including driver’s licenses, passports (passport photos may not be included), birth certificates, marriage certificates, and stock certificates, as well as the cost to obtain police reports and the cost of additional legal expenses such as affidavits and notarizations required in connection with replacing documents as a result of a Stolen Identity Event
  • Traveling expenses – reasonable expenses, including gas, parking and airline tickets, incurred in traveling to obtain replacement documents, to attend meetings or proceedings, or to rectify records as a result of a Stolen Identity Event
  • Loss of income – actual lost income for time necessarily taken off work and away from your work premises, whether whole or partial days, including vacation days, floating holidays and discretionary days but not sick days or time taken away from self-employment, solely as a result of your efforts to amend or rectify records relating to your true name or identity as a result of a Stolen Identity Event
  • Stolen handbag, purse or wallet – actual cost of replacing your stolen handbag, purse or wallet in addition to replacing the cash contained therein, as a result of a Stolen Identity Event. No coverage will be provided unless the theft is reported to law enforcement within twenty-four (24) hours of the incident.
  • Childcare and elderly care – actual cost of providing additional childcare or care of elderly relatives that you are directly responsible for while having to travel to replace documents, attend meetings or proceedings, or rectify records as a result of a Stolen Identity Event
  • Travel Assistance – reasonable additional expenses incurred in order to obtain duplicate, replacement or new travel documents, including passports and airline tickets, as well as additional reasonable travel and lodging expenses incurred to enable you to return to your permanent residence as a result of a Stolen Identity Event
  • Fraudulent withdrawals – the principal amount of money you have lost resulting from an unauthorized transfer of monies from one or more of your checking, savings, money market, or other financial accounts, or from the theft of a tax refund obtained or secured by the filing of a fraudulent tax return with the Internal Revenue Service or the taxing authority of a U.S. State, unless you have received reimbursement from another source or failed to request reimbursement from the entity holding the account from which funds were stolen
  • Legal costs – reasonable and necessary expenses paid to lawyers and other legal professionals appointed by us and with our consent in connection with remediating a Stolen Identity Event, including defending any civil lawsuit filed against you, removing any civil judgment entered against you, defending you against any criminal charges filed against you due to the actions of another while using your identity, and assisting you with an audit or other proceeding or hearing conducted by a governmental agency as a result of a Stolen Identity Event
  • Remediation services costs – reasonable and necessary expenses paid to investigators with our consent and retained by us in connection with remediating a Stolen Identity Event, including the costs of recovering control of your personal identity and recovering losses you incurred
  • Case management services costs – expenses paid to an identity restoration case manager, as needed and approved by us, or incurred by us in complex Stolen Identity Events

You can't DIY those reimbursements (stolen handbag, purse or wallet insurance!?) and they could be significant in some cases, though there are limits to the insurance coverage. The often quoted dollar amount, like $1,000,000, usually refers to the last two line items – remediation services and case management services. Those will be the most expensive anyway.

That's why I consider the identity theft protection services as more of an insurance policy that has a bonus monitoring service, and not the other way around.

One other consideration, and I'm not entirely convinced about the frequency, but many of these programs also offer child protection as a monthly add-on. Child identity theft is especially hard to detect because we often aren't looking for it. I've never requested a credit report or my kids, though technically they're each permitted a free report from each bureau every year!

(finally, there's always the issue of mail theft or package theft, which no monitoring service can prevent)

Do you use an identity theft protection service like Lifelock, Identity Guard, or Identity Force? (there are easily a dozen of these types of companies, I just listed some of the more popular ones)

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Jim Wang

About Jim Wang

Jim Wang is a thirty-something father of three who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and a farm in Illinois via AcreTrader.

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  1. Laura says

    We’ve been given free access to one of the services (thanks to security breaches). You would think they would notify you right away of any new credit lines/inquiries, but the reporting is delayed.

    We applied for a HELOC while under one of these subscriptions and for 3 whole months after getting that new credit line in place, the report always came back as “no new inquiries, no new credit lines opened”, even though we knew otherwise (because we opened the credit line).

    Moral of the story: the extras might be worth it, but don’t count on being notified promptly of any funny business.

    • Jim Wang says

      Hmmm, I wonder if one the service only monitored your report from one of the bureaus and not all three? I’ve had near instant notifications via one of the free services (I think it was Credit Karma) when I applied for a credit card.

      • Laura says

        I think you are correct. When I emailed to ask about it, they said they monitor only one of the credit reporting agencies and rely on word getting back to them at some point from the others.

        We recently had our auto registrations/insurance cards stolen, so went ahead and put a freeze at all 4 CRAs (Innovis is one some aren’t aware of – hat tip to Krebs on Security). Cost a bit for us to do that in our state, but things should be locked down fairly well now.

  2. FIscovery says

    I like the added protection, early detection, and insurance/reimbursement options that these services provide – – there is no cure all out there, but IMO, anything to help deter or defend against is well worth it – – the cost is not substantial and well below what it could cost you to undo this yourself (let alone the mental anguish). Just read the fine print, know what you’re getting, and also look to see if you can get this protection bundled in with a credit card offer or through your banking institution – – it may be available to you now without any additional cost, you just need to do a bit of discovery (or FIscovery :))

  3. Ryan says

    I think for many people, it’s a matter of when identity theft happens, not if. I don’t think there is a perfect solution to protect one’s identity. You can do a credit freeze, but that only stops new lines of credit. It doesn’t account for other things like medical identity theft, tax return identity theft, and other things.

    Like you, I look at Identity Theft protection as insurance – mostly for the time and effort it takes to unravel the mess. I’ve read horror stories of people spending months to unravel the problems. At $100 or so per year, it’s not cheap. But it could be well worth it if it saves you 10-20 hours (or more).

  4. Doug @ The-Military-Guide says

    Thanks for the LifeLock summary, Jim. I hope they follow through on their support and don’t make the claim as painful as the identity theft.

    I requested our daughter’s credit reports from the free site through most of her teen years. (When she turned 18 it became her responsibility!) There was never a problem, and it was just one more SSN to enter into the site while checking on us parents.

  5. Nela Gilbert says

    I have used and worked with Legal Shield’s (Previously Pre-Paid Legal) service since it’s inception. It is provided by Kroll Background America the experts in the industry of forensic accounting and restoration. Every year it seems they add yet another service to the existing service many times without any extra cost and our service has been honored at the same rate since I took the plan out. They have a single credit monitoring but for a few dollars more I chose the triple credit monitoring and when they allowed me to add minor children as well for only $1 per month more that was a no brainer! Children should not have a credit file however as people don’t inquire on their socials with the credit bureaus many times they are victims of having their social stolen and used with a false identity of what appears to be an adult and intermingled to a point that an 18 year old trying to get say school loans or their first credit card are denied and by then the IDT has run rampant. I don’t actively sell for the company any more other than referrals so this is not a pitch if you will. They are the best and on top of that they even have some benefits for a pre-existing situation as well as a flat fee to REPAIR a pre-existing situation. A true IDT is actually where a criminal if not many actually becomes you and this can cause such an indepth devastation of your financial and credit life that in many cases it’s a no brainer to pay a fat fee to get your life back. Interestingly several years ago when all these companies started popping up as the next expert many of the companies including the ones you hear on the radio and TV daily were investigated for their credibility if you will and one of the largest (I won’t name names) was fined more than a million dollars as well as being made to return a months fees to every client that was mislead and made to review and change their service. Legal Shield / Kroll received no such fine or orders as they do what they say and are wonderful at what they do. It’s worth it, it’s cheap to be blunt and it’s not a matter of if you will have your data stolen it’s when it will be used… meaning myself for example. I have had my social included in more major thefts than I can count anymore yet I have been lucky to not have a major IDT happen… many of us are in the same boat if you think back of how many times you have been notified about your data being lost. It’s not if, it’s when so protect yourself but choose the plan wisely. Here is the actual coverage detail for anyone who might be looking for help. Again I just offer this as an educated insider I only assist my current clients and their referrals or someone who is serious in getting assistance.

  6. Ron says

    Protection for child identity theft might be helpful for myself and hundreds of thousands of other Americans. My wife and I were victims of the massive IRS “Get Transcript” fraud in 2015.

    https://www.washingtonpost.com/news/powerpost/wp/2016/09/12/thieves-stole-taxpayer-data-from-irs-get-transcript-service/?utm_term=.61bbed6cd0a6

    Online thieves obtained our prior tax return forms which include our children’s social security. So I will definitely look into the services you mention in your article. Thanks for the great advice Jim!

  7. Brad says

    After my nephew and his wife went through this, it sure opened my eyes. You never think it’s going to happen to you, then it hits close to home.

    Thanks for the breakdown and information here. Next step, getting signed up. I think it’s just good insurance and peace of mind. A strange world we’re living in, have to keep protected at all ends.

    Good stuff!

  8. Gene Roberts says

    I have used the Lifelock service for years. I consider it primarily as insurance as well.

    There are too many ways to monitor your credit for free to have paying for it make any sense.

    Credit sesame and credit karma, and bankrate offer free accounts that let you see any changes to your report and score (though the score they show is not FICO).

    If you are in the market for a mortgage or refi, an actual FICO score can be useful as opposed to the ones you get on credit sesame and karma. But these can be obtained for free as well if you hold certain accounts.

    I get a free monthly Equifax FICO score from my Digital Federal Credit Union account.

    My Walmart credit card account gives me a free monthly Transunion FICO score.

    All these resources should be sufficient to monitor or even rebuild your credit.

    It’s all gravy over 760 anyhow. No need to obsess over it and check it every day.

    • Jim Wang says

      I think a lot of folks who obsess over it kind of look at it like a game – they want a high score. Does it impact their day? No… but I suppose it’s better than obsessing over Candy Crush. 🙂

      • Gene Roberts says

        I get that too. I used to have a myFico subscription @$120/yr . Just didn’t seem worth it after a year or two. Candy crush is probably cheaper. 🙂

        It would be cool to see a perfect score of 850. I got close @847 once or twice. But that’s almost impossible.

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