Is LifeLock and Its $1 Million Guarantee A Sham?

By now, most everybody has heard or seen the ubiquitous ads by LifeLock where its founder and chief executive officer, Todd Davis, intimates the impenetrable fortress-like quality of his identity theft protection service by brazenly giving out his social security number (457-55-5462).

In one TV advertisement he even says, “If anything happens for any reason while you’re a client of LifeLock, we will cover all losses and all expenses up to $1 million.”

That is a very impressive proclamation.  But is LifeLock promising more than it can actually deliver?

Furthermore, are all identity theft services a sham?

How Does LifeLock Work?

So how does LifeLock protect you from identity thieves?  For $10 per month, they put a fraud alert on your credit files at the three major credit bureaus (Experian, Equifax and TransUnion) and renew that alert every 90 days.  The company also will help you cancel lost credit cards, licenses and other documents if you lose your wallet, contact the Direct Marketing Association to remove your name from pre-approved credit card offers, and provide you with a free copy of your credit report each year.

Here’s the Catch: Of course, you can save $120 per year by doing all this stuff yourself for free.

Here’s the Catch – Part Deux: Fraud alerts are not foolproof, folks!  In fact, Davis found that out when he became a victim of identity theft as a result of his ads.  Oops.

The only sure-fire way to prevent unauthorized access to your credit file is to issue a credit freeze, something LifeLock does not do – although you can bet Mr. Davis finally has.  Better late than never, right?

What was that social security number again?   457-55-5462.   Thanks.

The $1 Million Guarantee

Remember, the TV ad promised if anything happened for any reason while you’re a client of LifeLock, they would cover all losses and all expenses up to $1 million.  That sounds like a pretty cool deal doesn’t it?

But the Million Dollar LifeLock guarantee is not an insurance policy – it’s a contractual commitment backed by LifeLock.  On their website, LifeLock promises to spend up to $1 million to hire lawyers, investigators, consultants and whatever else it takes to restore your name and help you recover the direct losses from the identity theft.

Here’s the Catch: The guarantee does not cover any direct losses as a result of the theft and no money ever passes directly to a LifeLock member.  In fact, the contractual agreement ensures that you will NOT be paid for identity theft losses related to:

1) lost wages or business profits
2) loss of business or lost opportunities
3) direct out-of-pocket expenses like postage stamps, gas or mileage to go to local authorities, notary public fees, etc.

Indeed, lack of restitution for stolen funds or fraudulent charges is a major exclusion that many folks might find objectionable.  So much for covering “all losses and all expenses,” right, Mr. Davis?

Hey, what was that social security number again?  457-55-5462.   Thanks.

Do-It-Yourself Theft Prevention

Although LifeLock is probably the most well known provider of identity theft protection, there are others including ProtectMyID, Equifax, TrustedID, and ID Watchdog.  Are these services a sham?

I wouldn’t go that far.

But instead of paying these services $120 or more per year, why not save the money by simply being proactive with respect to protecting your own identity?  Here’s how:

- Get a copy of your credit report. US citizens are entitled to three free credit reports per year, thanks to the Fair Credit Reporting Act. By getting one report from each of the major credit bureaus every four months, you can monitor your own accounts for fraud on a regular basis.
- Call your bank and tell them to stop sending “convenience checks” in the mail. Not only do they result in ridiculously high interest rates, thieves often steal these directly from your mailbox and use them to make their own purchases.
- Cut down on junk mail; by doing so you can greatly reduce the chance of thieves stealing credit card offers from your mailbox and hijacking your identity. The Privacy Rights Clearinghouse will show you how to reduce unwanted junk mail.
- Use your common sense: Keep important documents, such as passports, tax returns, social security cards, and financial statements secure at home, and always use a shredder before disposing of all your important papers.  Most importantly, don’t be stupid like Mr. Davis who wantonly shared his social security number (457-55-5462) with everybody.  (Thanks.)
- As a last resort, consider a credit freeze. This will completely lock down your credit file, although a pin number can be used to temporarily unlock it. Credit freezes can be a hassle, however. They may also cost money if you are not already a victim, and in most states they are permanent until you remove them. Credit freezes also interfere with the approval of new loans, insurance, employment screening, and other transactions. Finally, you must make sure to contact all three credit bureaus (Experian, Equifax, and Trans Union) separately.

LifeLock’s Davis (social security number: 457-55-5462) compares the company’s theft protection services to an oil change; consumers can do it or pay an expert to perform the service.

I would suggest a better analogy is not an oil change but, rather, filling your gas tank – and how many of you out there would pay a convenience premium to do something as simple as that?

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19 comments to Is LifeLock and Its $1 Million Guarantee A Sham?

  • I like this one Len, I have always felt as if Lifelock’s claims sounded a little bit too convenient.

  • Thanks, Matt. Usually, if something is too good to be true, it usually is – and the LifeLock guarantee definitely falls into that category.

    Len

  • When I first saw Todd Davis on TV giving out his SS#, I thought he was an idiot.

    I wasn’t surprised at all to learn that fraudsters started credit accounts in his name.

    LifeLock seems to have about the same marketing technique as ShamWow.

    Thanks for the analysis on their service and their “limited” guarantee.

  • I thought the same thing, Bret! I just knew somebody would find a way to exploit his SSN after he gave it out. I am amazed that Davis was not aware that his company’s service still left him very vulnerable to fraud. Obviously he did not even know what he was selling. Utterly unbelievable.

  • I wouldn’t say they are sham. They are providing you with a service and something personally I don’t want to do it myself. True, you could do it yourself, but for $10 a month it just seems to make you life a lot easier. You do not have the added support for lawyers if your don’t have have lifeock. We all know that lawyers are not cheap!

    • You are right, Garen. Many people might be satisfied paying $10 a month for that service. But it is important that everybody knows that LifeLock isn’t doing much that people can do for themselves.

  • Rusty

    Like so many other things in life, as a society, we’ve become soft and are willing to pay for services that people in the past would never consider. Insurance has expanded into almost every area of our lives. People sue for almost any reason they can concoct. They spill hot coffee on themselves and they blame someone else. Shield insurance is available for those who LEGALLY carry a firearm. We live in a time when a criminal can take everything you own if you should defend yourself; law enforcement and the legal system no longer equate with justice. LifeLock is just another form of insurance to make life a little easier and to deal with a system that has become increasingly user-un-friendly. It is a sign of the times.

    • Len Penzo

      Very interesting regarding shield insurance. I never heard of it, but I do believe I will look into it, Rusty. Thanks for the tip!

  • Mike1949

    Here in California we’ve been able to freeze our credit reports since about 2004. My wife and I immediately froze our credit reports when this went into effect. We’ve had to unfreeze them a couple of times to re-finance our home or buy a car. Yes it can be a hassle. It costs 10 bucks, you need to use the PIN provided when you told them to freeze your account but it is so worth it. No one has access to your credit information without your approval. Of course there are certain exceptions such as legal or law enforcement inquiries that don’t require your approval. We unlocked our account to buy a car about three years after the freeze and the report showed 8 credit card inquiries that had been rejected. I still believe putting a freeze on your credit reports is the best safeguard against identity theft.

    • Len Penzo

      I have my credit frozen too, Mike. You’ve summed up the minor pitfalls pretty nicely too. For me, it’s a small price to pay for the security it provides.

  • I’m also going to recommend a credit freeze. If you have to pay, it’s not that much (I think ~$60), but I think it’s free in a lot of places now. Once you have it, if you want to apply for anything you get a temporary lift – that means you take about ten minutes, go to the website of the three credit bureaus, enter your pin, and tell them how long you want it lifted for.

    Aaaand…that’s it. Minimal hassle, minimal cost, and the only possibility of anyone committing identity theft against you is if they happen to strike in the small window when you have the freeze lifted (well, other than stealing your credit card and such).

    Get a credit freeze. If you’re applying for a line of credit or a credit card and can’t be bothered to take 10 minutes to go online and lift the freeze, you might want to take a good look at your relationship with credit.

  • Val

    identity theft is so rampant these days. we should always be careful with our personal data.

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