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Policies ease evil of ID theft

It's a pretty frightening prospect _ some low-life steals your identity, goes on a spending spree racking up massive bills, ruins your credit, maybe even files for bankruptcy in your name, and all before you know what hit you.

If the thought of becoming the next identity theft victim has you spooked, there's a relatively new type of insurance aimed at you.

Called ID theft insurance, it doesn't do the legwork needed to reclaim your identity and restore your good name, but it reimburses you for many of the expenses.

Those costs can include telephone calls, photo copying, notary and mailing expenses, lost wages for time away from work to make court dates and the like, certain attorney's fees and the cost of ordering credit reports to keep tabs on your newly restored credit history.

The average identity theft victim spends some $800 to $1,000 fixing the mess, according to Linda Foley, executive director of the Identity Theft Resource Center in San Diego.

How can you get the coverage?

The Insurance Information Institute lists five big insurers offering it, either as part of customers' homeowners or renters policies, or as a separate policy.

They include Chubb Group, Travelers, Encompass, Farmers Group and American International Group, although the latter doesn't sell directly to the public.

At Travelers, which offers ID theft coverage as an add-on and as a standalone policy, demand has skyrocketed, a spokesman said.

"We've probably more than doubled the number of customers over the last year," said Walter Grote, identity theft product manager at the company, which began offering the coverage in 1999.

Although not many insurers offer ID theft protection, Grote said he wouldn't be surprised if it soon became a standard part of homeowners policies.

Travelers charges $25 a year for up to $15,000 worth of coverage if it's purchased as an add-on, and from $60 to $180 for between $5,000 and $30,000 in coverage as a standalone policy. The deductible is $100.

Chubb, which has been offering ID theft protection for the past two years, provides $25,000 worth of coverage as part of its homeowners and renters policies at no additional charge. The deductible is $500.

Chubb's policies are pricier than most, "but they throw in a lot of bells and whistles," insurance institute spokeswoman Jeanne Salvatore said.

Besides insurers, you may be able to get ID theft coverage through your credit card issuer.

In April, Visa announced it would start offering free coverage for up to $15,000 in expenses, which credit card issuers in turn could provide to all their card holders or use as an enticement for customers to sign up for a particular card or as a reward for premium card holders.

So far, Capital One is the first to start using it. It's offering the coverage for free to new customers as an incentive to sign up for its "No Hassle" card.

So what do some experts think about ID theft insurance?

The Consumer Federation of America's Bob Hunter said the coverage wouldn't be high on his recommended list.

For people with limited resources, "I'm not sure it's a wise investment of your insurance dollars," he said, pointing out that victims rarely incur a major financial loss. If your credit card is used fraudulently, for example, federal law caps your liability at $50.

Before buying any specialty insurance, make sure you're first covered against calamities through adequate health, life, home and disability insurance, Hunter said.

Foley of the Identity Theft Resource Center isn't keen on the coverage, either.

An identity theft victim herself, Foley said her biggest burden wasn't financial (she estimates she spent about $200), it was the strain and aggravation of having to prove her innocence to creditors.

She said she spent roughly 200 hours, which includes time in court, clearing up her records.

Still, as long the insurance is relatively cheap, it may be worthwhile, she said.

If ID coverage is something you're considering, here are a few tips:

As with any insurance, read the prospective policy before buying to make sure you understand the terms. And don't hesitate to ask questions.

Be wary of a high deductible. If it's too high, the policy might not be worth the cost.

Look for broad coverage. Some of the potentially more valuable areas of coverage include paying for the cost of reapplying for loans rejected while your identity was under siege and hiring a lawyer if a creditor comes after you.

Why would you need a lawyer?

"Sometimes it can get real messy," Travelers' Grote said.

Good policies also will reimburse you for lost wages if you have to miss work for such things as filing police reports and appearing in court.

Travelers' policies pay lost wages of up to $500 a week for four weeks. "When Tiger Woods got his identity stolen, he may have had his people take care of it. But the ordinary Joe would probably have to take time off work," Grote said.

Take steps to avoid being victimized in the first place.

The Federal Trade Commission (www.ftc.gov) and the Identity Theft Resource Center (www.idtheftcenter.org) offer a host of tips.

"There are simple things to do to make it harder for a criminal to take your identity," Grote said.

One of the most important is guarding your Social Security number, which "really opens up a lot of doors" for the ID thief, he said.

If the number appears on any cards that you keep in your wallet, such as an insurance card, black it out, Grote said.

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