Cell Phone Insurance

by Ryan Yates

Can cell phone insurance protect your budget, or is it just a waste of resources?  Health insurance, home owner’s insurance, car insurance, and life insurance are the most common ways families protect themselves.  Continue reading to see if you should add cell phone insurance to the list of insurances you carry.

Today most people have some type of smart phone. The iPhone, the Droid, the Hero, the Blackberry, whatever the name the cost of the phone can be expensive.   All the major cell phone service providers offer some type of insurance plan. The cost of the plan varies slightly from carrier to carrier and is added onto the monthly bill.  Each insurance provider requires a non-refundable deductable to be paid at the time of service and/or replacement of the device.  These fees range from $50 to $125 per claim.

The Cost of the Phone

Smart phones cost a lot of money.  The Apple iPhone is around $550 for a new 3GS 32GB.  The Motorola Droid is roughly $300 for a new 16GB version.  The HTC Sprint Hero is currently running $230.  These prices are for the physical phone.  They do not include wireless service and are not tied to any contact.  These are the prices you’d pay if you just wanted to purchase the phone.

The cost of the phone is greatly reduced when it’s purchased with a contract through a wireless provider.  Sometimes the phone is free, although the free phones don’t have all the bells and whistles people demand these days.  The price of the iPhone is $199 when it’s purchased with AT&T wireless service.  The Droid is $199 through Verizon, and the Hero is $99 through Sprint.  These phones are purchased with a 2 year service contract with the wireless carriers, and usually are bundled with voice, text, and internet service.  Most consumers use this option because the initial investment is much cheaper and more affordable. Purchasing free Verizon phones will mean you can save money on the actual phone and allocate your budget for a plan or extra services.

The Cost of Insurance

Depending on the company the price to insure a phone varies by a few dollars per month.  Verizon charges $7.99 for the Total Equipment Package and has an $89 deductable.  Sprint charges $7.00 for its Total Equipment Package with a $50 or $100 deductable.  While AT&T charges $4.99 with a $50 or $125 deductable.  All cover the replacement of the phone if it’s lost or damaged, including damage resulting from a suicide drop into the bathtub.  The non-refundable deductable is the only catch.  You are charged this fee for any claim on the phone.

The cost of insurance for the life of the phone for Verizon is $192, Sprint is $168, and AT&T is $120 assuming a 2-year contract length.  The real question is whether this expense is necessary, or just a way for the providers to make some extra money.

The Sweet Spot

As with any gadget, the longer it’s on the market the cheaper it will become.  It seems like every month brings us a new and improved cell phone to purchase.  As the new phones come onto the market, the older phones will continue to drop in price.  Taking this fact into account there must be a sweet spot for carrying insurance on the phone.  Simply put, there is a time that it makes since to stop wasting money on paying the insurance premiums.

The sweet spot occurs when the price of a replacement phone is near the cost of the deductable.  This price point would be around the $100 mark using the average deductable from the top wireless providers.  A much smarter person than I could pin point the exact time that it becomes more beneficial to stop paying the insurance, but I’ll just use the cost of the deductable.  It’s simple, and easy.

Let’s look at an example.  The Blackberry Curve has been around a while now can be purchased new for under $100.  Most wireless providers offer the Curve for free when signing a 2 year contract.  If we apply our new rules, it would not make since to purchase the insurance.  The cost of the deductable is $100 which is more than the cost of a new phone.  Add on the monthly fee and you’ll be wasting money.

Here another example.  The cost of the iPhone 3GS is $550 to replace it.  In this case you’d be smart to purchase the insurance at $5 a month and pay the deductable of $125 if something bad was to happen.  Revisit the cost of the iPhone 3GS during the second year of ownership.  If the cost to replace the phone is now $150 then you may want to drop the coverage and save the money.

Accidents Happen

Last week I dropped my Sprint Hero in a puddle of cutting fluid.  I quickly rescued the phone and performed open case surgery on her.  I was able to revive her after a battery pull and thorough cleaning.  I thought we were in the clear, but all of a sudden she began to lose feeling on her screen (yes, she is a touch screen phone).  My touch was not longer able to wake her.  I was devastated and began my search for a cure.  The replacement price on eBay was too high, so I choose to file a claim with Asurion (Sprint’s Insurance Provider).  I will receive my new phone sometime today and Ginger (the deceased) will be placed into her coffin and shipped back to Asurion for cremation.  I’ll miss her, but Lacy (my hot new Hero) will be her replacement.  Lacy is costing me $100, but she is well worth the price.  I can’t bear to go a single day without one of these beautiful and functional Ladies on my hip.  Good bye old girl.

Bankrate.com offers 10 reasons not to get the insurance.  Getting the insurance is a personal choice.  If you are hard on equipment it is probably worth the cost.  If you have a $300 case protecting a $250 phone then you can skip the insurance.  It’s your call, don’t let the sale person steer you into a plan you do not want.


Jeff @ sustainablelifeblog May 25, 2010 at

I’ve always considered insurance and after dropping my old phone into the toilet, I was strongly considering it this time around. I got lucky with my last one because not long after the contract was up, it went into the toilet. I wasnt happy because the phone still worked great and I didnt want to pay for a new phone.
The costs this time seemed quite high, and as you mentioned, phone prices drop fast. I elected not to do it, and i’m not regretting it (yet)

Also, as a tip, I’ve heard putting your old, soaked in water phone in rice or in the freezer, and it may work again (it didnt work with mine for long)
.-= Jeff @ sustainablelifeblog´s last blog ..Did I Just Steal ~400k from MYSELF?!?! =-.

Jeffrey Kosola May 25, 2010 at

Hey Jeff, I love the old phone in the toilet trick. I’ve done it many times with my work nextel. But those damn nextels just keep going and going.

The solution my phone dropped into was a mixture of oil and water. The water was the easy part to take care of. Everyday a little more oil would leak from the phone. I knew she wouldn’t last too long. This was the first phone I had insurance on, so we’ll see how the new one works out today.

Jesse May 25, 2010 at

The horror!!! I am so careful with my phones..although oddly I have never named any of them..(my daughters name is Lacy, funny.. 🙂 )

But if I worked or lived in a more hostile environment, or did more outside activity, I would certainly consider insurance. Phones now aren’t cheap and if you are accident prone and care about your phone, they are a great investment.
.-= Jesse´s last blog ..Guest Post: Don’t Devalue Yourself =-.

Jeffrey Kosola May 25, 2010 at

I know Jesse “The Horror!!!!” I just checked my FedEx tracker and Lacy is sitting on my door step waiting for me to come home. I hope she’s protected from the sun today, it’s 85 here right now.

I only have the insurance because I work in a factory. If I worked a normal job I would bank the extra money, but it seems to have worked out for me this time.

Jeffrey Kosola May 25, 2010 at

There is MORE HORROR to talk about. I just finished getting the new phone activated, which took forever because they first activated with my wife’s number instead. After the phone was working I tried to connect the phone to my computer through USB to transfer my info over. It wouldn’t connect 🙁 After troubleshooting the connection I notice the USB pins were all pushed back. No connecting that phone. A second Hero is one the way now, I sure hope this one will work. Major FAIL.

Now I have that old school song stuck in my head, “I need a hero…”

Jesse May 25, 2010 at

Yikes! I have actually heard of that happening, but on a good note I have a friend that is on his FOURTH palm pre..versus my first Hero. My boss’s wife is on her third Pre. those things really aren’t built very well.

My only question for you…what’s the name of the newcomer?
.-= Jesse´s last blog ..Guest Post: Don’t Devalue Yourself =-.

Que May 25, 2010 at

Who needs insurance??? I’m sure the IPhone has an app for that too.
.-= Que´s last blog ..Storm Brewing in the World of Que =-.

Jeffrey Kosola May 25, 2010 at

Good point Que, it’s called iSurance

general auto website June 15, 2011 at

“It is true smart phones ARE costing respectable sums but the depreciation is also very high…” great quote!

Bucksome Boomer May 25, 2010 at

I decided to take my chances and didn’t get insurance when I got my Droid six months ago. It’s worked out so far….

My fear with insurance is that I wouldn’t remember to cancel at the point that it no longer makes sense.
.-= Bucksome Boomer´s last blog ..Internet Savings: Coupons =-.

Mysti May 26, 2010 at

G-man is incredibly hard on EVERYTHING. Clothes, cars, electronics. His previous phone when swimming in the pool twice, for a spin around in the washing machine, and various other drops, kicks, knicks. Believe it or not, we were able to save the phone for the most part (camera didn’t work, numbers 4,5,6 didn’t work), but we got by. I refused to replace the phone because he was careless.

We got new phones in February (an entry level smart phone), and in less than 2 days he had scratched the touch screen (and that was with the case on it).

We got the insurance this time. Verizon lets you change phones at the 20 month mark (I think), but I am not confident that his phone will survive that long. I will almost bet his phone will be dead within a year.
.-= Mysti´s last blog ..This is what happens when you think you are a doctor =-.

Daniel May 27, 2010 at

I decided to skip the insurance on my iPhone. The $70 up-front cost wasn’t worth it. Especially since iPhones come with a 1 year warranty. I would really be paying $70 for that second year, which isn’t worth it to me.

I always advocate skipping the insurance. For a family of 5, it comes out to $25/month. After 4 months, you can buy a new phone and if you put off breaking it any longer, you come out ahead!

I’ll take my chances!
.-= Daniel´s last blog ..Tips on Budgeting – Good and Bad Debt =-.

Monevator May 30, 2010 at

When I last tried to work this out — and it was a while ago, in the early 2000s – I got a figure of about 8 months at the point at which cell phone insurance stopped being good value for money. Given the insurance I was buying ran for at least 12 months, I didn’t get it.

If you don’t get insurance, you have to assume there’s a reasonable chance you’ll sometimes have to pay for things that you lose. You have to amortize that cost over all your lifetime of owning stuff.

Personally I think insurance only really makes sense for frugal, fairly liquid investor types like myself when the costs are semi-catastrophic, or potentially uncapped. It’s pretty cheap in the grand scheme of things to replace a phone.

Forest May 31, 2010 at

Good info and thoughts here. I have a crap old hand me down phone but would likely grab insurance with a good phone, obviously until the dedcuctible is close to the phone value…

.-= Forest´s last blog ..My New Guitar, Smart Spending or a Wasted Expense? =-.

Abe December 26, 2010 at

It is true smart phones ARE costing respectable sums but the depreciation is also very high… non sense investing in insurance, I rather save for the next phone. Great Post.

toughcell March 15, 2011 at

Good post and sorry to hear about Ginger. There are lots of coverage options out there aside from carrier insurance including the manufacturer’s warranty, cases, extended warranties, self insurance, credit card warranties, home/renter’s insurance and 3rd party cell phone insurance.
Here is some more detail: http://www.toughcell.com/blog/insuring-your-smartphone-what-the-options-are/

James April 6, 2011 at

This might be worth doing for some of the latest, expensive phones. I couldn’t see myself buying insurance for my current Nokia from 2006 though 😉

Paul July 27, 2011 at

Don’t know about in the states but in the UK a good home insurance company covers loss of a mobile phone in the house or outseide so for most people here it really is a waste of time plus the excesses on specific mobile phone insurance policies is far too much.

Mitesh Puri August 30, 2011 at

You guys are lucky. In India, insurance companies don’t even easily provide mobile insurance covers. And the reason being very simple. Higher perceived risks…

verizon phone insurance June 14, 2012 at

Thanks for your blog. I just landed up in your blog and I really appreciate your blog. It is full of resourceful information.

Chris August 4, 2012 at

I used one from http://www.mycellphoneinsurance.com It was a kind of unpleasant having to fork over another $130 after I just purchased a $200 phone but over time it’s cheaper than going with Verizon’s insurance. Plus they offered me a free buy back program. The store clerk said I should be able to sell my new phone back to my insurance company for $135 which is more than I paid for the program. I figure that even if I didn’t use it, I will at least get my money back. Hope this helps some one else.

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