Identity Theft Protection and Insurance: What the FTC Says

TL;DR: Credit monitoring will not warn you if money leaves your bank account or a tax refund is claimed in your name, and identity theft insurance generally does not reimburse stolen money. Free freezes, alerts and reports do much of the job.

👉 Check my digital footprint — free 30-second check →

Paid identity protection is heavily marketed. Regulators describe the products in plainer terms, and those terms are the best filter for any brand.

What monitoring does

The FTC says credit monitoring tracks your credit report and alerts you when a company checks your credit, a new loan or card account appears, or details such as your address or phone change. The CFPB describes identity monitoring as watching credit applications, public records, websites and other places for unusual activity, and notes that bundles often add identity theft insurance, black-market website surveillance and public record searches.

What it does not do

The FTC says credit monitoring will not tell you if someone withdraws money from your bank account or files a tax return with your Social Security number to collect the refund. Identity monitoring services generally will not alert you if your details are used to claim government benefits such as Medicare, Medicaid, unemployment or Social Security. On dark web monitoring, the FTC's consumer alerts say emails claiming your info is for sale on the dark web can be phishing, and to change your email password first because email is often the weak link. Read the dark web monitoring guide for the limits.

Free alternatives the regulators point to

Free credit reports from each of the three bureaus.
A credit freeze, which the FTC says is free to place and remove and lasts until you lift it.
An initial fraud alert, which the FTC says lasts one year, is free and needs only one bureau contacted.
IdentityTheft.gov, where the FTC gives a free personal recovery plan.

The CFPB says fee-based "credit locks" are no more effective than freezes, which are free, and warns that "free" offers may carry trial periods or cancellation fees. If a breached company offers free monitoring, the FTC says to take advantage of it. See the credit freeze guide.

Identity theft insurance

NAIC says identity theft insurance reimburses certain costs of restoring your identity, such as legal fees, lost wages and administrative expenses, and generally does not reimburse money stolen from your accounts. It can be bought alone or bundled with homeowners or renters policies. Check what is included and excluded, the deductible and the limits. The FTC says the same: these policies typically cover recovery costs but generally will not reimburse money scammers stole.

The FTC's LifeLock cases

In 2010 LifeLock settled with the FTC and 35 states for $12 million. The FTC alleged its claims that it could prevent identity theft and protect against all types of identity theft were false, and that its fraud alerts addressed only new-account fraud. In 2015 LifeLock agreed to pay $100 million to settle charges that it violated the 2010 order, including falsely advertising alerts as soon as it detected identity theft. In 2019 the FTC mailed more than $31 million in refunds to former members. The lesson is to read what a service actually promises, not the headline claim.

Recovery is free

If it happens, report at IdentityTheft.gov and follow the plan. The CFPB steps are to contact the affected institutions, file the report, tell local police and place a fraud alert. The FTC reporting guide and the recovery timeline cover what follows.

Tools protect accounts, but they cannot un-leak data that is already out. A free digital footprint check shows whether your email or number appears in exposed data.

Frequently Asked Questions

Does credit monitoring stop identity theft?

No. The FTC says it alerts you to changes on your credit report. It will not tell you about bank withdrawals or a fraudulent tax refund.

What free alternatives does the FTC recommend?

Free credit reports, a free credit freeze, a free fraud alert, and a recovery plan at IdentityTheft.gov.

Does identity theft insurance replace stolen money?

NAIC and the FTC say it generally does not reimburse money stolen from your accounts. It covers recovery costs such as legal fees and lost wages.

Is a paid 'credit lock' better than a freeze?

The CFPB says fee-based credit locks are no more effective than free security freezes.

What did the FTC find about LifeLock?

It settled charges in 2010 ($12 million) and 2015 ($100 million) over false claims, per FTC press releases.