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According to the FTC’s 2011 list of top consumer complaints, ID Theft has the largest number of reports for the 12th year in a row. Don’t let this scare you into buying extra ID theft protection, though. In fact, Consumer Reports reported that in 2010, identity fraud actually dropped 27% in 2010. On top of that, the instance of the really bad ID theft, where someone uses your identity to open new accounts or mooch on your insurance, is really quite rare.

Not only is ID theft not as big a problem as some protection and insurance sellers claim, it’s usually not necessary. Federal protection guarantees that you’re only liable for $50 max if your credit card is hacked. For debit cards, you’re liable for only $50 if you catch it within two business days, and $500 if you catch it within 60 days, though you may be on the hook for everything if it goes unnoticed for longer than that. If you’re checking your accounts regularly, like you’re supposed to, then it shouldn’t be a problem. Even if you don’t notice a fraudulent charge right away, it will depend on the fine print whether your fancy-schmancy ID theft protection will even cover the loss, and many financial institutions have policies that actually reduce your liability beyond federal requirements.

If you still feel like you’re exposed and want some type of coverage, don’t jump immediately to a service. First check your home or renter’s insurance policy. I know mine has an ID theft clause in it, which I’m actually seriously thinking about dropping just because it’s an extra expense I probably don’t need. If you must, and I mean absolutely must, get extra protection from potential ID theft, make sure to check out the company you’re getting it from with the Better Business Bureau. That will at least give you an idea of whether others have had good or bad experiences with them.

In the end, though, a lot of the services these companies offer, you can do it yourself. Get your free credit report every year from to check for inconsistencies. Keep an eye on your accounts regularly and use smart Internet safety tactics.