Phone Insurance: Worth The Cost Or Useless?

With the cost of smartphones continuing to rise, many are left wondering if phone insurance is a necessity or a waste of money. While it can provide peace of mind and protect you from accidents, phone insurance may not be the best option for everyone. The decision to insure your phone depends on several factors, including the cost of your device, your financial situation, and your attitude towards risk. This article will explore the pros and cons of phone insurance to help you decide if it's the right choice for you.

Cost of insurance vs. cost of replacement

The cost of insuring your smartphone varies depending on the insurance provider, the device, and the deductible. The cost of insurance can range from $7 to $36 per month, with deductibles ranging from $29 to $225 per claim. Some insurance plans may also have different deductibles for different types of damages. When deciding whether to insure your smartphone, it is important to consider the cost of insurance compared to the cost of replacing or repairing the device.

Smartphones are expensive, with the average cost of a cell phone being around $550, and some phones costing over $1,000. If your phone is damaged, lost, or stolen, you may need to pay the full price of a replacement. For example, a top-of-the-line Samsung Galaxy S9+ or iPhone X could set you back $840 to $1,149. In addition, repairing a cracked screen, the most common repair, can cost around $277 on average. Other common repairs, such as a broken power button, can cost over $90.

When considering the cost of insurance, it is important to factor in the monthly premium and the deductible. For example, if you have a $1,000 iPhone, a $13 monthly insurance premium, and a $199 deductible, you could end up paying over $500 in insurance and deductible costs over two years. In this case, it might be more cost-effective to self-insure by setting aside a small amount of money each month to cover the cost of a replacement or repair.

However, it is important to note that insurance can provide peace of mind and protect you from unexpected costs. If you are not prepared to spend hundreds of dollars to repair or replace your phone, insurance can be a smart choice. Additionally, insurance can help you avoid paying the full price of a replacement if you are still paying off your old phone.

Ultimately, the decision to insure your smartphone depends on your financial situation, the cost of the device, and your attitude towards risk. If you can afford to replace or repair your phone without financial strain and you take good care of your device, you may not need insurance. However, if you rely on your phone daily and are prone to accidents or loss, insurance can provide valuable protection.

Manufacturer's warranty

Phone insurance can be a necessity, especially when you consider the high cost of repairing or replacing a smartphone. Damaging a phone is not uncommon, and accidents can happen anywhere and at any time. Drops account for 42.7% of electronic device repair claims, and cracked screens account for 37%. Theft and liquid damage are also common.

However, before opting for phone insurance, it is essential to understand what it covers and what it doesn't. Most phone insurance plans cover accidents, water damage, physical damage, loss, and theft. The cost of insurance can vary from $7 to $36 per month, and you will have to pay a deductible for each claim, which can range from $29 to $225.

Now, let's talk about the manufacturer's warranty. When you buy a new phone, it typically comes with a manufacturer's warranty that covers mechanical and electrical failures for a limited time, usually a few years. This warranty guarantees that you can get your device repaired or replaced if it has manufacturer flaws or defects. For example, if your charging port, camera, or software is defective within a month of purchasing due to a manufacturing error, the manufacturer's warranty will cover the cost of fixing or replacing your phone.

It is important to note that the manufacturer's warranty does not cover accidents or damage caused by the user. If you drop your phone and the screen cracks, or if you spill liquid on it, the manufacturer's warranty will not cover the repairs. In such cases, you will have to pay for the repairs yourself or file an insurance claim if you have phone insurance.

Additionally, the manufacturer's warranty does not cover wear and tear, power surges, or damage caused by using non-recommended chargers. It is also voided if you attempt to repair the phone yourself or if the phone is lost or stolen.

So, is the manufacturer's warranty useless? Not exactly. It can be useful in the event of manufacturer defects or flaws during the initial years of owning your phone. However, it is limited in its coverage and may not be sufficient for comprehensive protection. On the other hand, phone insurance can provide more extensive coverage, including accidents and theft, giving you peace of mind if something happens to your device.

Personal circumstances

Deciding whether to get phone insurance is a personal choice that requires careful consideration of one's needs. Some key personal circumstances to consider are outlined below.

Firstly, you should assess your financial position and your attitude to risk. Ask yourself: if my phone was lost, damaged, or stolen, could I afford to repair or replace it and still have enough money to pay for everyday essentials? If the answer is yes, or if you have an old handset that you could use temporarily, then phone insurance is probably unnecessary.

Secondly, consider your personal history with phones. Do you have a history of losing or breaking phones? Do you tend to carry your phone in a safe place, like a zipped bag, or in a coat pocket? If you suspect you might be a ''higher-risk' phone user, you may have more need for phone insurance than others.

Thirdly, think about how you use your phone. Do you rely on your personal phone for business, and would you need a replacement as soon as possible if it was damaged or stolen? Do you work in extreme conditions or near water or heavy machinery that could put your phone at risk? If you answered yes to any of these questions, phone insurance could be a smart choice.

Finally, it is important to consider the specifics of your phone. Is your phone already protected from the elements, especially water? You can check the water resistance of your smartphone, and if it has a good rating, you may be safe in the event of a spill or drop in water. Also, do you already have coverage in case of theft or loss through the personal property portion of your renter's or homeowner's policy?

Phone insurance limitations

Cost and Deductibles

While phone insurance can provide peace of mind and protect against financial strain, it is important to consider the cost of the insurance plan and the deductibles you may have to pay when filing a claim. The monthly premiums and deductibles can add up, and in some cases, the total cost of insurance and deductibles may exceed the cost of simply replacing the phone. It is essential to evaluate whether the insurance policy is cost-effective for your specific situation.

Number of Claims

Most insurance companies limit the number of claims you can file within a year. This restriction is important to keep in mind, especially if you are prone to accidents or live in an area with a higher risk of phone damage.

Refurbished Replacements

In many cases, if your phone is replaced under an insurance policy, you may receive a refurbished phone rather than a brand-new model. This limitation is worth considering if you prefer to have the latest technology and a phone in pristine condition.

Coverage Exclusions

Phone insurance typically covers accidental damage, loss, and theft. However, there are often exclusions to the coverage. For example, some insurance policies may not cover water damage or cracked screens, which are two of the most common issues with smartphones. Additionally, if you have made any modifications or DIY repairs to your phone, your insurance policy may become void, even if the damage is unrelated.

Timing of Claims

Some insurance plans have specific timing requirements for filing a claim. For instance, if your phone is lost or stolen, you may be required to report it to the police and your mobile network within 24 hours to be eligible for a replacement.

Alternative Coverage

Before purchasing phone insurance, it is worth checking if your phone is already covered under other insurance policies, such as homeowner's or renter's insurance, or through a credit card protection plan. In some cases, you may already have sufficient coverage, making additional phone insurance unnecessary.

Self-insuring

For example, if you buy a new iPhone for $1,000 and pay $13 a month for insurance with a $199 deductible, you will end up spending $511 on insurance and deductible costs over two years. In this case, self-insuring would result in a savings of $489.

However, self-insuring may not be the best option for everyone. If you are prone to accidents or work in an environment that puts your phone at risk, such as near water or heavy machinery, then phone insurance may be a smart choice. Additionally, if you rely on your phone for business and would need immediate repair or replacement if it was damaged or lost, insurance can provide peace of mind and ensure you're not left stranded.

Ultimately, the decision to self-insure or purchase phone insurance depends on your personal circumstances and risk tolerance. While self-insuring can save money, it may not be worth the risk for those who are accident-prone or rely heavily on their phones.

Frequently asked questions