Is Smartphone Insurance a Smart Choice?

By Diane Tait

Image courtesy Pixabay

Unless you're a prepper who lives off the grid you probably own at least one cellphone.  Most people trade their phones in for new ones every 2.7 years on average.  While some replace theirs every year or two because they want to keep up with the Joneses, others wait to replace their smartphone until device performance forces them to do so, or because the manufacturer stops supporting their phone.  Regardless of whether you decide to replace your smartphone sooner or later, as soon as you decide to spring for a new one, you'll be asked if you'd like to opt-in for additional protection.  The question is, should you purchase cellphone insurance the next time you get a new phone?

1. Do the benefits outweigh the expense? – The reason many consumers opt-in for cellphone insurance is because they're afraid they'll break, lose, or have their phone stolen.  It's quite common for a person to have a smartphone fall from their pocket only to land on the concrete to crack the glass or land in water which will short one out.  If you've ever had a phone get broken or destroyed in the past, you may find that paying to replace it out of pocket can be prohibitively expensive, especially if you have a top-of-the-line model.  

2. What does it cost to insure a phone these days? - Smartphone insurance is sold either by the service provider or by a third party.  If you purchase one through a wireless carrier, the plans range from $7 to $36 per month, depending on the model.  If you opt-in, most insurers promise to repair or replace your phone if it's damaged or destroyed.  That means if you accidentally drop your phone in the trash or your dog turns it into a diecast plastic chew toy, you won't have to shell out the cost of a new unit.  However, that doesn't mean you'll be completely off the hook.

3. Don't forget the deductible. - Depending on the phone and the type of damage done to it, the associated deductibles range from $29 to $299.  Crack a smartphone screen and you'll be looking at anywhere from $29 to $149 to fix it depending on the carrier and the model.  More significant damage will set you back $99 or more to repair the device.  Destroy a phone and you could be out hundreds even though you're insured. (Always make sure you fully understand the charges and limitations of a cellphone insurance contract before you sign up for one.)

4. Don't assume your policy automatically covers you for loss or theft of your phone. - That's right, some insurers specifically exclude loss or theft from the coverage, while others will levy a substantial deductible for phones that are considered a total loss.

5. How many times can you file a claim? - Even if you agree to pay to insure your phone, don't think you've bought an E-ticket.  Read the fine print on the policy and you'll find that most carriers limit the number of times you may file a claim during any contract period.  

6. What happens if your smartphone is stolen? - While the loss of a phone is a problem, if the thief manages to gain access to it, you could be in for a world of hurt.  Not only can a thief use your phone to make free phone calls, texts, and web searches, they may also be able to access your contacts, passwords, and financial data if the phone isn't properly secured.  Either way, you'll need to contact your service provider and the police as soon as you discover your phone has been stolen.  (While some cellphone insurance will waive phone charges and data usage, they won't be held responsible for the theft of data or fraudulent charges made on the device.)

7. Does homeowner's insurance cover cellphones? - While your homeowner's policy may apply if your phone is stolen or damaged during a covered claim such as a fire, odds are having to pay the deductible will make the transaction less than ideal.  A better bet is to look into the extended warranty and purchase protection offered by your credit cards.  Some credit card companies offer what's known as purchase protection, which may double the manufacturer's warranty on your phone.  However, this coverage only applies to manufacturer's defects that occur in the first 2-6 months after purchase.  (Manufacturers and extended warranties usually won't help you repair or replace a phone that was accidentally damaged, lost, or stolen.)

Image courtesy Pixabay

8. What does it cost to repair a smartphone? - Just as you may opt to take your car to a local repair shop instead of the dealer, the same holds true for smartphones.  A local cellphone repair service can handle issues such as cracked screens, charger problems, unexpected shutdowns, and more in as little as one day.  

9. How can you protect your investment? - Before you activate your phone, make sure you equip it with a sturdy case and a screen protector.  Depending on the environment you choose to use your phone, you can purchase cases that protect them from accidental drops to complete submersion.  (There are even covers that float for all you boaters out there.)  If you tend to work in construction or another environment where a smartphone is likely to get stepped on, dropped from a height, or experience other hazards, there are cases designed to take a licking without destroying your phone.  

10. What other alternatives are available to smartphone owners? – If you aren't overly accident-prone and you tend to keep your smartphone longer than a year or two, you might consider setting aside the monthly fee you'd pay to insure your phone as an emergency fund should you damage, lose or destroy the device. If you're looking at $10-$20 per month, this adds up to hundreds of dollars in a year or so. What you need to factor in to determine if this makes sense for you is your past track record.  In the past decade, I've owned four mid-range smartphones and have only ever had one get destroyed due to my negligence. Since I always protect my screen with a cover and the phone with a case, it makes sense for me to opt-out of smartphone insurance.  You'll need to consider your history to decide if smartphone insurance is a smart choice for you. 

Diane Tait owns and operates A&B Insurance.  To find out more about how you can save money on boat insurance, go to her site.