Cell Phone Insurance: Hero or Villian?

Picture this…

You just purchased the latest android powered 4G cell phone and you’re thinking, “Life is good!” Just as your sale rep finishes activating your phone she mentions that smart shoppers protect their investments by adding insurance to their plans.  A moment of indecision sweeps over you. You know the replacement cost for your new toy is just over $500 bucks. 

What would you do? 

The camps are fiercely divided on whether purchasing cell phone insurance is an outright scam or a “smart” choice. Consumer advocates like David Kolata, executive director of the nonprofit Citizens Utility Board, feel that shoppers should pass on insurance, and save the money they would have spent.

While insurance providers like eSecuritel state that one out of every four cell phone users report a loss, damaged or stolen phone. Their website lists several reasons why you need “special” insurance.

Here are a few tips to help you decide if buying insurance is the right choice for YOU. 

Pros

Replacement Coverage. If you just bought a really expensive model like Samsung’s Android Epic 4G, having insurance may be an economical choice if you’re worried about losing or breaking your phone. You’re better off paying your premiums plus a $50 deductible, than shelling out $499 for an identical phone.  

Got Tweens or Teens?  Kids are notorious for losing things.  Having insurance may be a cost-effective option for you.

You’re a Klutz. Are you the type that is forever losing car keys or breaking grandma’s good china? If so, purchasing a policy that covers these types of mishaps may be worth the expense.

Cons

It’s Expensive.  Most plans start at $5 per month, per phone. With a standard two-year contract that’s $120; not including the $50 deductible you’ll pay when you file a claim. 

A frugal option is to save $5 every month.  Use this money if you have to buy another phone. Unless you’re the type that demands the latest in technology, you can find budget-friendly models on eBay and similar sites.

Check Your Warranty.  Most phones purchased from authorized carriers have one-year manufacturer’s warranties.  Why buy insurance when you’re already covered? Read your paperwork to find any limitations.

Personal Articles Policy.  Your homeowner’s, renter’s or auto policy may already cover lost or damaged cell phones. It’s easy to find out if yours does by calling your agent.

Lost Phone.  Chances are you’re not going to lose your phone.  But if you do, use your old one or buy an inexpensive refurbished model using the money you saved.

My Story

Last November (2009), my husband, son and I renewed our Sprint cell phone plan by “purchasing” Blackberries.  Our deal … free phones, and a $150 credit. 

I passed on the insurance. 

One month later my husband dropped his phone, and cracked the LCD.  Rigor set-in that evening.

The next day we took his phone to our local Sprint store, explained what happened and asked what they could do.  Imagine my surprise when the sales rep gave him a new, identical Blackberry for free! 

This month, October 2010, I took my phone in for service.  My data plan was not working.  Once again, Sprint came to my rescue with a new Blackberry.  The price? FREE!  🙂

Final Thoughts

The decision to buy insurance depends on individual circumstances.  If you decide to add an insurance plan, make sure you read the mice print.  Know your policy’s restrictions, what it covers, deductible amounts, whether you’ll receive a new phone or one that’s been refurbished. And, if your Lamborghini will be replaced with an identical model or with an old Yugo.

Evaluate your needs, and then make an informed choice.

What are your thoughts on cell phone insurance?  If you have a policy, have you filed a claim?  Was it a harrowing or seamless experience?  Weigh in.  I’d like to hear your story.