Is Cell Phone Insurance Worth the Price?

by Kay Lynn

Hung UpWhen you select a cell phone carrier there are many decisions to make which may include:

  • Should you get a prepaid phone plan or one with a monthly fee?
  • Do you need a Smart phone?
  • How many minutes, texts and data megabytes do you need?
  • Do you want phone insurance?

That last question isn’t surprising these days.  Retailers try to sell purchase protection for every electronic sold even the lowest cost small kitchen appliances!  But is it a good idea?

Benefits of Cell Phone Insurance

If you are someone who seems to go through cell phones like water through a hose, then you might want to consider insurance even if it is a free tmobile phone. I know people who have lost use of their phone by one or more of the following: dropping it in the toilet, running it through the washer (in pocket), dropping it or just plan losing it.

A person with an expensive phone and bad luck might want to consider the insurance offered by your cell phone carrier.  You’ll quickly get another phone.

Negatives of Cell Phone Insurance

That quick replacement comes with a cost on top of the monthly insurance fee added to your phone bill (which runs between $5 and $12 depending on the coverage and equipment).

The policy usually has a deductible.  The four main carriers all use the same company, Asurion, which has an $89 deductible according to Business Week.

Don’t think you’re getting a new phone though.  You are very likely to receive a refurbished phone instead of a new one.  If your phone is no longer available, they’ll make a substitution which you may consider inferior.

Conclusion

I don’t think paying for cell phone coverage makes sense in general and definitely not past the first six months you’ve owned it.  Instead save that money and buy a replacement on Craigslist or EBay if needed.  What do you think about cell phone insurance?

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{ 15 comments… read them below or add one }

FB @ FabulouslyBroke.com November 29, 2010 at 6:27 am

I didn’t even know cellphone insurance existed.

I’d just be more careful with my phone and buy the cheapest one available. No smartphones here.

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Kay Lynn November 30, 2010 at 11:53 am

Is cell phone insurance unique to the US? I do have a smart phone but it’s not the most expensive one so I’m willing to take a risk going without insurance on the phone.

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MoneyCone November 29, 2010 at 7:40 am

Might work for some, not for me! I do use the extended coverage my CC offers though! Free is good!

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Kay Lynn November 30, 2010 at 11:54 am

MoneyCone, does that protect you against damage or loss?

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The Financial Blogger November 29, 2010 at 10:10 am

Never thought of that kind of insurance and don’t think I will in the future (your post made me sure of it!). Thank you for the research!

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Crystal & Co November 29, 2010 at 8:25 pm

Excellent information Kay Lynn.

Personally, I think it is a waste of money. Instead, save $5-$12 on your own each month and put it towards a brand new phone of your choice should something happen to yours.

And spending money on something like an iphone is just not realistic to me. It just seems so frivolous and unnecessary at this point in my life.

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Kay Lynn November 30, 2010 at 12:02 pm

Crystal, for us it would be a big waste of money as we would use it. My husband did “wash” his phone a few months ago but he was due for a new free phone anyway so we went that route to replace it.

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Bret @ Hope to Prosper November 29, 2010 at 8:42 pm

The new smartphones have gotten pretty expensive. But, paying $7 extra per month doesn’t make a lot of sense to me. I never buy the insurance and have been lucky enough to never have needed it.

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Kay Lynn November 30, 2010 at 12:03 pm

Bret, I agree with you. The risk that you’ll have to pay $200-400 for a new smart phone isn’t worth paying a large monthly fee plus deductible.

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Financial Samurai November 29, 2010 at 11:01 pm

It came in handy TWICE.

So, from my stand point, yes, it’s worth it as I use it so much and travel. But generally, I’d say nope.

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Kay Lynn November 30, 2010 at 12:03 pm

Sam, you must be hard on those phones! One of my son’s did have the insurance but now he buys replacements off Craigslist.

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Evan November 30, 2010 at 9:02 am

In the end it is an insurance policy like any other. I think there is a break point when you can get YOUR phone on ebay for the same or a little more than the deductible.

I used it once a month after I got the phone and boy was I glad I had it!

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Kay Lynn November 30, 2010 at 12:05 pm

Evan, you are correct. Most of probably think the risk isn’t big enough to pay the cost; but others (FS) have a different thought and experience.

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Money Reasons December 4, 2010 at 11:57 pm

I agree with your conclusion!!!

I’m with FB on this one! I didn’t know such an insurance plan existed!

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Kellen December 11, 2010 at 3:28 pm

I got cellphone insurance for my current phone (a smart phone) as I had dropped my old phones a lot, and even put one in the washing machine once. A smart phone is a lot easier to break if you drop it too, so I thought it might be worth it.

My plan sounds a little better than what it could be – I use Verizon, and I pay $5/ month and the deductible is only $50. But, if I pay $5/month for 2 years (when I’ll use my upgrade anyway, probably), that’s $120 bucks!

So, I think I will not get insurance with my next phone, but I’ll also keep this old smartphone as a backup in case I break the new one. No way am I paying full price for a new smartphone without having an upgrade available!

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