Why Does Dave Ramsey Push Identity Theft Insurance*?
If you’ve listened to the Dave Ramsey Show for any amount of time, you know he is constantly recommending Identity Theft Protection from Zander Insurance. Every time the subject of identity theft comes up, he gives a little spiel about how he’s purchased it for everyone on his team. But why would he recommend this product?
Obviously, Zander Insurance is a paid advertiser of the Dave Ramsey Show. That’s clear from his website (though not always clear on the show). But Dave says he only endorses products he truly believes in, so we’ll assume that he actually feels this product is beneficial to his listeners.
Zander Insurance’s website says the company provides the following services to its Identity Theft Protection Customers:
Protection
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A personalized protection test to see how vulnerable you are to identity theft (Sample question: “Do you use a crosscut paper shredder on credit card bills/offers, bank checks/statements, and other documents with personal information (e.g., Social Security, credit card, and driver’s license numbers) before throwing them away?”)
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Monthly newsletters and scam alerts
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Links to the Opt-Out/Pre-Screen and Do Not Call Registries, and information about how to place a fraud alert (visit AnnualCreditReport.com and click on “Fraud Alert”) or credit freeze (send a written request with a copy of your ID to each of the three credit reporting agencies: Equifax Security Freeze, P.O. Box 105788, Atlanta, Georgia 30348; Experian, P.O. Box 9554, Allen, Texas 75013; TransUnion, Fraud Victim Assistance Department, P.O. Box 6790 Fullerton, CA 92834)
Recovery
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If your identity is stolen, a Personal Recovery Advocate to develop a damage assessment and recovery plan, handle any creditor dispute resolutions, continue to monitor credit bureau activity, work to remove any criminal or civil judgments, and provide information to the FTC and other government agencies
Reimbursement
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Reimbursement for lost income and expenses associated with an identity theft (i.e., legal expenses, long distance fees, overnight charges, etc.), up to $20,000
Here is the statistic Dave uses to justify purchasing a policy: According to the Identity Theft Resource Center’s (ITRC) “Identity Theft: The Aftermath 2006″ study, victims spend an average of 600 hours recovering from this crime.
Wow, how horrible. But I looked up the ITRC’s study, and here’s what the press release about it says:
In The Aftermath 2006, victims spent an average of 97 hours repairing the damage done by identity theft to an existing account used or taken over by the thief.
In cases where a new account was created, respondents in the 2006 study reported an average of 231 hours to clean up the mess. In some cases, respondents used such expressions “eight years and still working on it,” “too many to count” or “endless.”
Hmm, not exactly 600 hours, is it?
Why would Dave tell people trying to get out of debt to make their own meals, fix their own roof, mow their own lawn, etc., but then turn around and tell them to pay a company $72 per year to clean up a mess that hasn’t occurred yet?
Frankly, it’s beyond me.
If you’d like more information about why buying identity theft insurance is a dumb idea, please read Single Ma’s post, Is Identity Theft Insurance Worth the Cost?, at Fabulous Financials.
Now if you’d excuse me, I’ve got to go shred some papers (don’t you just love the way it smells when you grind up eight sheets at a time?).
11 responses so far
This is a good post. I don’t know that I agree with you, however. It seems to me like Zander is providing a good service to those people who don’t understand or can’t take care of this themselves. Consider a retired 80-something person who has no idea how thieves can steal her identity and would rather pay $6/month to not worry about it. It sounds reasonable to me.
OTOH, I personally will just close all my credit cards (I have closed most, but I’m not out of debt yet!) and then freeze my credit. This way nothing can be applied for in my name, and I’ll be notified if someone tries to do anything under my name. And of course I’ll check my credit reports every four months. I already do that… ALL for free.
Anyway, it seems like it’s a good service. You have to remember that not as many people are as smart as you and I are, and if they can pay $6/month and be done with the worrying, so be it. I think it’s good that the option is out there for those who won’t/can’t do it on their own. At least, it’s better than those people having their identity stolen and having it suck the life energy out of them for four months of evenings. I think so, anyway.
That’s true. Dave Ramsey’s radio audience is probably older and less computer savvy than us.
I just feel that with all the time he spends talking about purchasing identity theft protection, he could do more to educate people about how they can keep their identity from being stolen in the first place.
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I read your blog posting and wanted to comment to add a perspective that I think has not been addressed. Your comments seem to be questioning Dave’s motives as well as his reasoning for recommending our Identity Theft Protection Plan. I will leave the questions regarding his motives or assumptions about how he feels about his advertisers to others to determine because I feel that most realize his reputation is above questioning…though everyone has an opinion.
The focus of your concern is Dave quoting 600 hours as being the amount of time to recover from an Identity Theft and that being the reasoning for purchasing an ID Theft protection plan. Though the reference to this number is accurate it is a bit dated since it was part of a study in 2004 which is when we first started developing and offering our plan. I have referenced the link: (www.idtheftcenter.org/artman2/publish/m_facts/Facts_and_Statistics.shtml.) We periodically send Dave updates and have meetings to keep him abreast of any changes in the marketplace. If you can provide the source where your data is published I will certainly have it updated.
However, the numbers you reference from a recent study seem to offer just as a compelling reason to consider ID Theft Protection. Whether 600, 231 or 97 hours the amount of time it takes to clean up an ID Theft occurence is formidible and is very frustrating since most people do not have the knowledge, experience or background to deal with all the different entities involved. In addition, the landscape of ID Theft has changed greatly in just the past few years whereby credit related issues are not the only risks people need to be concerned with. As reported by the FTC, one quarter of their complaints are now coming from IRS events and fraudulent returns related to ID Theft. In addition, Medical ID Theft, employment related uses, and Social Security fraud issues are all now fertile territory for ID Thieves.
You question why Dave would recommend a plan for $72 when they are trying to get out of debt and the event has not occurred yet. I know that he feels that certain types of insurance and other protection plans are a waste of money as evidenced by his discontent for cancer plans, cash value type life insurance, critical illness plans, etc. He does however feel that some risk transfer/insurance programs are warranted based on the pricing and benefit offered. That is why he recommends term life insurance, disability, health insurance, long term care and ID Theft Protection…under certain specific terms.
There are many ID Theft protection plans available and as you noted most of them do not offer much of a benefit to their clients. However, the article you reference “Is Identity Theft Insurance Worth the Cost?, at Fabulous Financials,” is severely flawed in its reasoning. A more appropriate commentary would be a recent review by Kiplinger’s titled “Paying for ID Theft Protection Is Not Necessary” details the limited protection most plans offer. It also states that any plan that has value offers restoration services that covers all types of ID Theft including those I mentioned previously. This is why Dave recommends our plan.
The idea that any plan can prevent ID Theft is a fallacy. Your statement that Dave should spend his time teaching people how not to become a victim is an indication of the idea that many people have, that somehow through personal action you can eliminate the risk. There certainly are steps people can take to help reduce their risk which is why we provide helpful links and explanations of how to use free consumer services that are available to all. Most other plans charge a fee to do what people can do for themselves at no charge. However, the growth of data breaches and especially those that are intentional such as TJ Maxx and the recent NY Hospital records clerk selling 50,000 records indicate the lack of ability someone has in controlling their personal data.
Dave recommends our plan because it addresses the total scope of ID Theft whether credit, employment, benefit, social security, etc. related and because our restoration services are fully managed for the the client eliminating greatly the time, effort and frustration they experieince. And yes, we do pay him an advertising fee but there are no commissions or revenue sharing. In addition, he was adamant that the cost be at the level it was since that was part of his cost-benefit analysis. It is between 30-75% less expensive than other plans not offering any type of restoration assistance. In addition, we were not the first company to approach him for advertising. He turned down several other companies whose plans had limited focus and higher costs.
I realize that this is a long winded commentary to your blog and I understand you may not choose to post it. However, I wanted to give you our perspective and am more than happy to answer any questions that may come up in the future.
Thank you, Jeff. I welcome your response.
I suppose I am taking a risk not to have identity theft insurance at this time, but I do what I can to try to prevent it and am confident that I have the ability to clean it up if it does occur.
I don’t think identity theft protection is a fundamentally bad product (at least not your company’s product), it’s just a monthly cost that people trying to get out of debt need to give serious consideration to before signing up. While it is my choice not to sign up, it may not be the appropriate choice for everyone. That said, I may be inclined to purchase identity theft protection in the future when I’m out of debt.
I could not agree more with your follow up comment. Every person has to measure the importance and priority any type of insurance or protection plan has with respect to the dollars that they spend. People make decisions all day about whether to carry auto, home, life and other types of protection and many choose to go without. There is no clear cut answer for anyone just a system of analysis that can bring people to different conclusions. I choose to spend the $6 per month and find that since I have a complete resolution plan I do not need to worry everytime I hear of a breach or get a letter telling me my info was compromised and having to begin research to determine the extent of the problem. Most importantly your goal towards being debt free is most commendable and is something I promise you is well worth the effort. THX
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The big difference between Zander and LifeLock I’ve seen is the fact that Zander costs $72/yr (http://zanderins.com/idtheft/idtheft.aspx) vs. LifeLock at $110/yr (https://secure.lifelock.com/enrollmentform.aspx) and the fact that, if your identity is stolen, Zander assigns somone to clean up the mess so you don’t have to deal with it at all, whereas I have not heard of LifeLock doing this.
Since taking time away from work to clean up the mess left behind after an ID theft is really what costs you money and stress, Zander is the winner here in my book.
Credit protection. I do not borrow or plan to borrow ever again. What do I care if a credit card company issues an impostor a card in my name? I would not spend one minute trying to clear it up because as I understand it the credit card company is on the hook for any charges approved, nor do I care if my credit score drops to 3 as I don’t plan on borrowing any money. Am I wrong?