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.
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.