This identity theft error cost a lot

When you’re a victim of identity theft, one of the first things you should do is cancel all the credit cards that have been compromised. If you have regular payments charged automatically to a card, don’t forget to change those payments to another card.

Forgetting to set up new automatic payments for a bill can have serious consequences, as my late partner and I learned. She was the victim of identity theft in 2003, when several of her cards were taken over by another person, who charged a lot of items and had the bills diverted to another address in the next county.

When she discovered the theft, she called the police, cancelled her cards and got new ones. We never knew how her cards came to be compromised but it didn’t happen again. As a mortgage broker, she knew a lot about credit and what to do if you’re a victim of identity theft.

But she missed something.

It's National Protect Your Identity Week, sponsored by the National Foundation for Credit Counseling and a new partner in this event, the Council of Better Business Bureaus. Here's some related reading that you'll find very informative.

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She didn’t realize was that she had forgotten to move one of her automatic payments to a new card:  her life insurance premium, on a policy she had been paying on since the 1970s. If her life insurance company sent her a notice saying her policy was being cancelled for nonpayment, she never received it.

For 30 years she had been careful to keep up her payments because she knew, as a cancer survivor who had contracted hepatitis C from a blood transfusion during her cancer treatment in the 1970s, she could never get a new life insurance policy.

• Bing: Identity theft horror stories

With the distraction of a move, a home renovation, declining health, a diagnosis of liver cancer and finally a liver transplant, she didn’t notice that her life insurance premiums weren’t being paid. By the time she realized what had happened, three years had passed. She wrote the company, explaining the situation and asking for reinstatement. Before she got a response, she died unexpectedly from an accident during a routine medical procedure.

If she had left children or a partner who depended on her income to survive, the consequences could have been dire. As it was, I ended up having to sell our house.

A story in the Oct. 18 Parade magazine, about how people often worry about the wrong things, noted that when we think about identity theft, we fear unknown computer hackers. In fact, the magazine says nearly half of identity theft victims are ripped off by people they know. Not only that, but 90% of identity thefts are committed not on the Internet, but offline.

The cautionary tale from my partner’s experience is that it’s important to keep track of your financial life, even after you automate such tasks as bill-paying. I use Quicken and download my transactions and match them up with my bank statements every month. Make sure to open your credit card bills, even if you haven’t charged anything. And make sure that all of your bills are truly being paid.

Related reading:

• The hysteria over identity theft
• Your 5-minute guide to protecting your identity
• The perils of automatic bill pay