Cyber attacks are increasing at an alarming rate and the resulting data breaches have led to countless amounts of personal information being exposed to unscrupulous individuals. While banks have become more proactive in monitoring accounts for activity that appears to be fraudulent, their services only play a small part in the overall campaign against identity fraud.

Are you familiar with how your personal information can be used by criminals? Many people immediately think of fraudulent credit card charges, which is certainly one widely used method. However, your personal information can also be used to open up new credit cards or lines of credit, illegally obtain tax refunds due back to you, or even file false medical claims to health insurance companies.

This is where identity theft insurance comes into the equation. Will it help? Certainly. But don’t expect it to be a comprehensive solution.

Whenever discussing identity fraud with my clients and prospects, I try to reiterate to them that identity fraud insurance is just like any other type of insurance. It’s reactive in nature. This means the coverage won’t provide you with any benefit until the damage is already done and you have to end up spending time restoring your identity and/or bank accounts.

What I always suggest is utilizing a two-tier approach. The first tier should be preventive. Employ a service that is proactive and constantly monitors your identity along with your financial accounts. For example, LifeLock (which I personally use) offers three levels of protection. Therefore it offers some flexibility rather than a one-size-fits-all approach. It also offers the option to monitor the identities of your children. Criminals love to get their hands on social security numbers that have no history attached to them.

I will attest to how valuable this service is, twice in the past ten months someone has used my identity to attempt to open a credit card through Amazon. Both times I was able to stop the process before the card was received by the criminal and any charges could occur.

LifeLock isn’t the only service that offers this type of protection, so be sure to conduct some research and find a solution that works best for you.

The second tier in your fight against identity fraud should be insurance. As I mentioned before, this is reactive and will provide you with services such as access to fraud specialists, assistance with filing police reports, access to a credit monitoring service, and even expense reimbursements for lost wages, credit bureau reports, and various postage, phone, and shipping fees associated with the theft of your identity.

If you want to take things a step further, consider freezing your credit. This will make it extremely difficult for identity thieves to open any new accounts using your information. Just make sure you lift the freeze in the event you need to undertake a legitimate transaction that requires your credit report!

Unfortunately no single method is 100% foolproof, but the more layers you can add to your identity protection, the better off you’ll be.