Cell Phone Insurance

Is Cell Phone Insurance Worth the Cost?

When you go into the store and pick out your fancy new Android or iPhone, the sales folks always offer you an insurance plan for your phone. These plans are usually about $10 per month and sound like a good deal, but is it really worth the cost?

Two Year Contract

Most phones come with a two year contract. That means, at the end of two years, you are eligible to buy a new phone at your carrier’s discounted price. For the rest of this post, we will assume your new phone costs $200 or $500 to replace out of pocket.

If you pay for an insurance plan at $10 per month, you will pay $240 in premiums over the life of your phone. That is more than you paid to get it and about half of the cost of buying a new phone directly from your carrier.

Deductible Cost

Let’s say you do drop your phone. I’ve done it. My phone has tumbled down the stairs (thanks to the folks in China who made my $2 case that saved it) and bounced off of the concrete many times. With my old phone, two of those drops caused a problem.

Repairing the screen when the glass cover broke cost me $100. I dropped it again without a case on and the LCD screen died. That one also cost me $100. The combined cost of those two repairs was still less than the $240 I would have paid for insurance.

But it gets even worse when you use the insurance company to repair the phone. For most plans today, you have to pay a deductible of $150 for your repair. That means for any repair under $150, you pay the full cost.

If I had insurance on my last phone, the one that broke twice, I would have still paid the $200 for repairs (probably more because I would have had to use a Verizon authorized repair facility instead of the phone repair shop in my neighborhood) plus $240 for the insurance.

The numbers just don’t add up. It’s a bad deal in my case.

Total Loss

I know, I know. You might have had a worse broken phone than me. Maybe there was a toilet or swimming pool involved and the rice trick didn’t work. Your phone is a goner. You have to get it completely replaced.

In that case, your cost for insurance is $240 plus the $150 deductible. In total, you spend $390 for the insurance plan that replace your phone, which would have cost $500 to replace had you purchased it from Verizon. In that case, it looks like you’re saving $110 by having insurance.

But don’t pat yourself on the back just yet. That same phone (I used the Droid Razor Maxx from Verizon Wireless for all of the numbers above) costs only $369 on eBay… for a brand new phone. In reality, you actually still spent $20 more than the replacement cost of the phone to have the insurance plan take care of it for you.

Bad deal.

Don’t Get Phone Insurance

The moral of this story: Don’t pay extra for phone insurance. The numbers simply don’t add up. You get a much better deal just taking the phone to an independent repair shop or buying a new one for yourself on eBay, Amazon, or anywhere else you can find the phone at a more reasonable price.

Protect Your Phone

What’s cheaper than getting the phone repaired or buying a new one? Not breaking it at all! I really have a $2 phone case that really works. (The cheapest I could find today was $2.79.) The two times my phone broke, I dropped it without a case. Every other time it has survived just fine. All it took was a case.

I’m also careful to keep my phone away from water, coffee, firearms, explosives, dogs, open windows, stoves, microwaves, open flames, water devices, and anything else that may damage, break, or destroy my phone.

Phone Insurance Stories

Do you have any phone insurance horror stories? Please share your thoughts and stories in the comments.

Image by robertnelson /flickr, edited by Eric

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