Cell Phone Insurance - Is it Worth it?

Cell Phone Insurance Pros & Cons

Cell Phone Insurance

If you happen to be accident prone, having cell phone insurance seems like a good idea. After all, you are spending hundreds of dollars for one of the best cell phone plans, so if you drop it in a pool or lose it, it makes sense to cover your investment, right?

You can buy cell phone insurance at the time you purchase your new phone. Cell phone carriers provide coverages touting peace of mind for you in that if anything happens to your phone they'll replace it for you. However, what's sometimes lost in the fine print might make your jaw drop.

Here are some factors to keep in mind when considering cell phone insurance.

Cell Phone Insurance - Is it Worth it?

Replacing Your Phone Can Be Expensive

Since insurance providers can never have enough of your money, they add a deductible to your cell phone coverage. The deductible is the amount you pay before they process the claim. Below is a look at the deductible amounts charged by each carrier's plan:

  • Verizon - $99-$199 for smartphones; $49-$199 for basic phones and tablets
  • AT&T - The starting deductible ranges from $50-$199, though if you don't file any claims for a specified time you can receive up to a 50 percent discount on your deductible
  • Sprint - $50-$100
  • T-Mobile - $20-$175

Therefore, when you sign up for one of these plans, not only are you paying a monthly fee, you'll pay a deductible as high as $200 to replace the phone. That is math not in your favor, especially if you chose to buy your phone on a contract plan. This value distends further when you consider your replacement phone might not even be new.

You're At Their Mercy for Replacement Phones

Insurance carriers are under no obligation to replace the exact phone you had. While some do their best to supply you with the same model, you could end up receiving a refurbished phone too.

The reason for this is insurance carriers have new and refurbished models to ensure they have adequate inventory for their customers. So, when you file a claim, you are rolling the dice on the model you receive.

Insurance Companies Drop Problem Customers

If you are someone who damages their phone often, cell phone insurance is a smart buy. At the same time, it's important to understand most insurance policies carry a maximum amount of claims you can file in a specified time--two claims in 12 months is the norm.

With this in mind, if you are prone to damaging your phone, you want to buy a durable case for protection, and if you lose it often, consider duct taping it to you. If you have filed two claims in a year, the insurance company can deny your third claim and even drop you from the policy.

In many ways, this seems nonsensical because the insurance policy is there to protect the people who require it the most. At the same time, insurance companies want to make money, so the more risk you present to them, the apter they are to drop you.

cell phone insurance can cover broken and damaged phones

Buy Insurance Directly Through the Provider

When you buy cell phone insurance through the carrier, they use a third-party provider for service. Logic dictates you might save money then by skipping the middleman and going directly with the insurance company.

In the short term, you will. Providers like SquareTrade charge lower premiums than you would pay with carriers. With that lower cost comes less protection, though. With cell carriers, you can choose tiered plans that cover theft and loss. SquareTrade doesn't provide coverage for these happenings, so it becomes a tradeoff between how much coverage you want and how much you need to pay for it.

online cell phone insurance providers may offer better rates

Do I Have Alternatives?

One of the best alternatives is to use a credit card to purchase the phone. Many card providers offer extended warranties to cover any malfunctions the device might have. Moreover, using your credit card is a smart way to lower your monthly cell phone bill. If you pay your monthly cell bill with your credit card and your device becomes lost or stolen, your card provider might provide financial protection for your loss.

If you have a current iPhone (iPhone 6s and newer), it makes more sense to buy AppleCare+. For $129.99, you receive the following benefits:

  • One year of hardware coverage
  • 90 days of free support
  • Repair or replacement of your phone, its battery, and earphones
  • You can file two claims during the length of coverage
  • You pay low deductibles when filing claims--$29 for screen damage and $99 for other damage plus tax
  • The coverage lasts for two years

With these factors in mind, you receive a full range of features, similar to you would with cell phone insurance plans, for less per month and you pay a lower deductible.

its up to you to decide whether you need cell phone insurance

Cell Phone Insurance Recap

In reality, there are no perfect solutions. If you have the cash saved in the off chance you lose or damage your new phone, it doesn't make sense to have insurance. However, if you don't have that money saved, then ensuring your phone in some way makes a lot of sense.

The best approach is to try to extend the manufacturer's warranty first. This is a less expensive alternative, offering you many of the same features you find with cell phone insurance policies. If that's a no-go and you used your credit card to pay for your cell phone and bill, then contact your provider to see if you have any coverage through them. Cell phone insurance should be viable only after you exhausted all your other options.

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