LifeLock

LifeLock is a business model I always found dubious. Years ago a man began appearing on television offering his social security number in advertisements and claiming his company could provide the same security from identity theft for something around $100 a year. They guaranteed one million dollars of protection and I doubted $100 could purchase one million dollars - that was all the facts I needed.

A few years ago I sat next to an insurance salesman on an airplane, who dealt with identity protection plans. He told me that the man in those ads knew so much about identity theft because he was a criminal that stole his father's identity fraudulently. This is true, according to the Phoenix News, in addition to other crimes the man (Robert Maynard) committed. Yet here in 2010 the LifeLock ads still run in primetime. They must have made a lot of money and it must offer some people some protection.

LifeLock puts fraud alerts on accounts with the three major credit agencies every three months. This is supposed to stop new lines of credit taken out in those names, or presumably extra diligence if attempted for legitimate purposes. This is a seemingly beneficial service since dealing with the credit agencies is time-intensive and not easy for the average person. Of course, should a line of credit not utilize one of those three agencies the protections offered are worthless - this is how current CEO Todd Davis had his ID stolen in 2008.

On the other hand, the million dollar guarantee is basically a fraudulent benefit. Reading the details it is clear the "guarantee" is for legal representation and not any of the losses incurred:

The guarantee does cover the cost for lawyers, investigators, case managers but not any direct losses as a result of the theft. Under the Terms and Conditions, NO money passes directly to our LifeLock members.

Furthermore, the liability for identity theft is typically nowhere near the value people suspect. Federal law limits the liability for a stolen credit card to $50 (0.005% of one million):

If your credit card is lost or stolen--and then is used by someone without your permission--you do not have to pay more than $50 of those charges. This protection is provided by the federal Truth in Lending Act. You do not need to buy “credit card insurance” to cover amounts over $50.

If you discover that your card is lost or stolen, report it immediately to your credit card company. Call the toll-free number listed on your monthly statement. The company will cancel the card so that new purchases cannot be made with it. The company will also send you a new card.

Make a list of your account numbers and the companies’ phone numbers. Keep the list in a safe place. If your wallet or purse is lost or stolen, you’ll have all the numbers in one place. Take the list of phone numbers--not the account numbers--with you when you travel, just in case a card is lost or stolen.

In fairness, the liability for a stolen debit card can be greater - up to $500:

For debit card fraud, your liability is $50 if you notify the bank with 2 days of learning of the fraud, and $500 or more after two days, up to the entire amount stolen under certain circumstances.