LifeLock's $1 Million Guarantee – Separating Fact From Fiction

Posted by Joe on June 16th, 2008

Recent reports of a two year old incident involving LifeLock's CEO have led many media observers, bloggers and consumers to conclude that the popular identity theft protection service simply doesn't work. In particular, many of these critics have taken the stance that the LifeLock $1 million service guarantee is an empty corporate promise that doesn't actually provide any protection to LifeLock subscribers.

We have spent several hours researching and analyzing the details of the LifeLock $1 million service guarantee. Our goal is to provide our readers with a balanced view on exactly how the guarantee works, what it does and does not cover and generally give enough insight for the average consumer to make a decision for themselves as to whether or not LifeLock is the right identity theft protection service for them.

It is important to point out at the outset that, according to statistics made available by LifeLock's CEO Todd Davis, only 105 of the approximately 1 million LifeLock subscribers have required the serviced offered by the $1 million guarantee since the company was founded in 2005. This means that about 0.01% of LifeLock subscribers have been victimized by identity theft since the companies inception. We feel this represents a pretty strong track record in identity theft prevention when you consider that about 4% of Americans are victimized by identity theft each year according to recent data published by the Better Business Bureau.

Another way to look at it is that the overwhelming majority, roughly 99.99%, of LifeLock subscribers will never require the services provided by LifeLock's $1 million dollar service guarantee. While we believe that every LifeLock subscriber should fully understand the full inner workings of the LifeLock guarantee, it is also important to realize that most subscribers will never need to use it.

In the unfortunate case that a LifeLock subscriber is victimized by identity thieves, they must notify the company within 30 days of first learning of the crime. Once LifeLock has been notified, a customer support representative will be assigned to the case and will work to verify the claim. While this step may add time to the recovery process it serves an important role of making sure that no subscriber attempts to game the system by reporting bogus claims in an attempt to fraudulently benefit from the LifeLock guarantee. In our opinion, this is an important step because it ensures that valid claims get the full attention of LifeLock's recovery specialists without being bogged down by false claims.

Once a claim has been verified, LifeLock will assign a third party recovery specialist to engage with the consumer, evaluate the identity theft incident and take all the necessary steps to fix the problem. Each identity theft crime is different so the steps taken to recover the subscriber's identity will vary from incident to incident. The recovery specialist is both an educational resource that can inform victims of their rights and the course(s) of action that may be taken to remedy the situation and a proactive advocate that will work on the victims behalf to obtain information, complete applicable forms and generally guide the subscriber through the recovery process. According to LifeLock, most identity recovery cases are resolved within 30 days of the $1 million service guarantee being activated.

While much of the heavily lifting can be completed by the recovery specialist, there are some key actions required by the LifeLock subscriber while the company is working to recover their identity. First, the subscriber must file a police report in person with their local authorities. This is not only required by LifeLock, but many identity theft experts, including the Federal Trade Commission (FTC), suggest that this is the first step that any identity theft victim should take. The victim must also fully co-operate with LifeLock's recovery efforts by signing, notarizing and returning applicable document as requested by their recovery specialist.

Some examples of steps that LifeLock may take to assist a victimized subscriber may include:

• Contracting an expert to help re-establish the individual's credit score back to where it was prior to the incident as necessary
• Canceling and replacing all identity cards, driver's license, passports, credit cards or other important documents as necessary
• Paying up to $1 million dollars to restore the identity of the victimized subscriber

That last point is what causes much of the confusion, discussion and controversy related to LifeLock's service guarantee. The guarantee is not an insurance policy. Rather, it is a contractual commitment backed by LifeLock that agrees to spend up to $1 million over the lifetime of any one LifeLock subscriber to recover their identity.

To be clear, LifeLock's $1 million service guarantee will NOT cover the following costs:

• Lost wages, business profits, loss of business or lost opportunities
• Direct out-of-pocket expenses such as postage stamps, gas or mileage costs or notary public fees
• Any direct restitution for any actual monetary losses incurred as a result of the identity theft incident

Many of LifeLock's critics point out that the lack of restitution for stolen funds or fraudulent charges is a major failing of the $1 million service guarantee. What they don't point out is that many financial institutions will not hold consumers liable for fraud committed against their accounts. For example, if a criminal makes credit card charges in your name you will typically not be required to pay for those charges if you report them in a reasonable time period (typically 30-60 days). Policies vary widely, so it is important to research and understand how your own financial accounts deal with fraudulent activity.

After fully reviewing all aspects of the LifeLock guarantee we believe that it is much more extensive then some of the company's critics may have you believe. It offers extensive support and assistance and covers many costs related to identity recovery. Additionally, LifeLock's positive track record of identity theft prevent means that 99.99% of their subscribers will never need to use the guarantee in the first place.

We feel that educated consumers that have done their research and understand the coverages and limitations of the LifeLock $1 million dollar service guarantee should feel very comfortable with the service. However, it is ultimately up to each consumer to decide whether LifeLock or any identity protection theft service meets their individual needs.

To learn more about LifeLock or other identity theft protection services, visit our identity theft protection service guide.