Everyone is afraid of identity theft. It seems as if every couple of days there are new reports of Social Security numbers and other sensitive information stolen, lost or leaked.
Just last week Countrywide Financial, which is now owned by Bank of America, said it would provide two years of free credit monitoring for customers whose confidential data were allegedly stolen by a former employee.
But should you spend money to buy services that promise to protect you from identity theft?
As in so many matters financial, it depends: on whether you don't mind paying for something you could do yourself for free, and on whether the company offering the protection can really deliver on its promises.
Most identity theft protection services actually watch out for only one type of fraud -- in which hackers or other thieves take out new credit in your name.
But there are seven types of identity fraud, said Avivah Litan, vice president and analyst at Gartner Research in Stamford, Conn.
They include abuse of an existing credit card account, abuse of an existing debit card account and checking account fraud, ranging from forgery to account takeovers.
New account identity fraud -- the type monitored by most services -- hits only about 1.45 million people each year, said Litan, who compiles industry statistics. "You have about a 1-in-200-million chance of it happening to you," Litan said. "Is avoiding that chance worth $120 a year? If you are a statistically based person, probably not."
But add in the other types of identity theft, she said, and the number of people affected goes up to between 9 million and 15 million annually.
Another problem, said Jay Foley, executive director of the Identity Theft Resource Center, a San Diego nonprofit organization that does not sell monitoring services, is that most companies that do claim to be preventive in fact are simply offering a way of detecting that you've already become a victim.
The service sold by another nonprofit, the similarly named Identity Theft Assistance Center, for instance, alerts you when new accounts have been opened in your name. The service is $10 to $18 a month and the center earns a fee whenever consumers buy it.
The group's website warns consumers not to be taken in by services that promise more than they deliver -- but the service offers little more than most of its competitors.
