ID theft insurance policies are taking off

After someone used Robert Nighan’s credit card to charge $2,000 worth of golf clubs in California, the insurance executive at St. Paul Travelers Cos. got an idea.

Nighan figured out a way to make crime pay legally: Sell an insurance policy to protect against identity theft.

So in 1999, St. Paul Travelers became the first company to offer identity theft insurance. It cost $25 as an option to a homeowners policy and covered the costs involved in fixing credit report problems in the wake of a crime.

The idea took off, and other companies followed.

“Our anti-fraud people say it is one of the fastest-growing areas,” said Bryon Tucker, spokesman for the National Association of Insurance Commissioners. Companies offering the coverage include Allstate Corp., American International Group Inc., Chubb Corp., Fireman’s Fund Insurance Co. and Metlife Inc..

Some critics complain that the insurance companies are profiting off a problem they helped create by giving or selling information about their customers to data aggregators such as ChoicePoint Inc., whose database was breached by identity thieves.

Rather than relying on insurance, activists say, consumers should be demanding tougher laws regulating how their personal data is used.

How to boost your portfolio

There are three small moves you can make right now, with minimal effort, that might boost your portfolio’s value in the long run.

• Cut the fat: Examine overlap in your portfolio by using Morningstar’s Instant X-Ray tool (at www.morningstar.com). If you own a large number of funds from the same fund family or more than one fund that uses the same investment style, chances are that many own the same stocks. Alternatively, you could consider chopping the fund in your portfolio that’s the most expensive relative to its peers. That seems especially appropriate, as plenty of funds have lately been cutting fees.

• Make a contrarian move: Fight back your instinct to buy the next hot fund. Rather, spend some time identifying funds that have been out of favor. That might mean boosting your allocation to a fund from a lagging category or finding one in your portfolio that has simply hit a lean patch.

• Review your exposure to credit risk: While junk bonds have been selling off a bit lately, there’s a good chance that if your bond funds have done well over the past year, it’s because they take on lots of credit risk. If so, you’ve probably made good money but may now have a lot of exposure to lower-rated issues. As such, now seems like a good time to cut that exposure back.

Companies counter 401(k) apathy

Getting employees to contribute to employer-sponsored retirement savings programs has been a vexing problem for companies in recent years.

Research has concluded that even employees who intend to participate in a plan just don’t get around to it.

To counter the lethargy, if not the antipathy, that many employees feel toward 401(k) programs, more and more employers have turned to automatic enrollment as one way to get greater numbers of employees to contribute to such plans.

Automatic enrollment defaults employees into participating into their company’s 401(k) plan. Rather than having to opt in at the point at which they become eligible, workers instead receive notification from the plan’s administrator that explains that unless they opt out, a certain percentage of their pay will be put toward their retirement starting on a given date.

Raise them right

It’s all too easy to raise financially irresponsible children. Many teenagers learn nothing about personal finance in school, and they learn all the wrong lessons from their free-spending friends. The danger: Your kids will grow up to be financially reckless, and you will feel compelled to bail them out. Don’t want to spend the rest of your life footing their bills? Here’s how to start instilling good financial habits in kids:

• Make no mistake, your children will make some appalling financial blunders. But it is a lot better if they make those mistakes while they are young and the sums involved are modest. To that end, it is important to give youngsters financial responsibility, starting with a toy-and-candy allowance when they are five or six years old and then, once they are teenagers, stepping it up with a clothing allowance and a bank account. The goal: to get your kids to make tough financial decisions.

• Tell your kids what they can expect from you financially. For example, you’ll pay for college but they’ll have to take out loans for graduate school. Tell them if you will be giving them money towards a down payment on a home, and how much, and whether you’ll help defray their wedding costs and to what extent.