Is Cell Phone Insurance Worth It?

Is Cell Phone Insurance Worth It?

Over the Weekend I had an “incident” where I dropped my new HTC Hero with Google.  Considering I am writing a post on Cell Phone insurance, you know all did not end well as I bobbled it and watched it land on its glass face.  My phone went from:

HTC-Hero-Sprint  TO Cracked HTC Hero

So for the first time since owning a cell phone I called up my cell phone insurance company, and it got me thinking is this cell phone insurance thing worth it?

The Convenience of Cell Phone Insurance

When I dropped it, I went to the computer to determine whether that was covered under my insurance plan.  I didn’t want to alert the insuring company that I broke it, and that wasn’t covered but “losing it” was covered.  The Cell Phone Insurance company’s website has a picture of a phone sitting in a mug of beer, so I guess I am not the only idiot out there!  When I found my agreement, it in fact covered almost everything, so I don’t know if it was a thing of the past when companies denied coverage.

Being that this was my first time ever using cell phone insurance, I decided to speak to a person rather than file a claim online.  The process took about 12 minutes and probably would have been quicker had I not asked a ton of questions.  In the end my new HTC Hero was being shipped to me over night (confirmation email indicates I should have by 3pm tomorrow, if you were worried).

In the past when I had lost or dropped my phone I scrambled to fight with my cell phone carrier to have them lock me in for another 2 years, or get on ebay looking for a good deal on a used phone.  It was very nice not having to do that.  But that came at a price.

Is the Cost of Cell Phone Insurance Worth it?

Like every insurance contract it comes down to numbers:

  • $7/month added on to my bill
  • $100 deductible
  • The Exact Phone, New, is about $300 on ebay; The exact phone, used is about $225 on ebay

Logically there seems to be a turning point when your replacement phone (through e-bay, Craig’s list, etc.) is at or near the price of your deductible.  It is inevitable, there will be a time when my bad ass phone is the free garbage phone that the phone companies push on people, and at that point the secondary market is flooded with phones that people are trying to recoup some sort of cost on.  For instance that “amazing” sprint palm pre which was going to be the iphone killer, that originally sold for $399 can be found for under $200 used on ebay.  It happens, it is inevitable and it sucks!

Notwithstanding my anger for the cell phone business model, there comes a point where the $7/month and $100 deductible just doesn’t become worth it anymore.  I have no idea when that will be, because I don’t know when “the next” phone will come out forcing early adopters to flood the secondary market with phones.

So, Yes, I think Cell phone Insurance is Worth it as long as the Secondary Market for your phone still is high.

Do you own cell phone insurance? Do you think my breakdown is wrong? Am I an idiot for having a relatively expensive phone?

24 Responses to Is Cell Phone Insurance Worth It?

  1. It’s funny I was just thinking of this the other day. I remember when I had insurance on my old palm treo which was $5 per month and only a $50 deductible. Now I pay $7 per month with the $100 deductible and I was starting to wonder if it’s really worth it. That’s $84 per year plus the $100 if something happens. I’m thinking I’ll keep it for the first year and if everything goes well probably drop it after that?

    • I think it depends on the type of phone you have – a year may be too long or too short. I think it has to do with the fluctuations on the secondary market. For example the Iphones are still way over $200 on ebay so their insurance still makes sense (if it is similarly priced).

  2. Interesting post. I have to disagree that this insurance makes sense for any length of time.

    You seem to be saying – if the total insurance payments to date plus the deductible is less than the replacement cost of the phone (presumably a used one) then the insurance is worthwhile.

    This assumes that the odds of you breaking/losing your phone is very high. For some people it probably is but in my case I’ve never had a problem with a phone like that. That said my wife just dropped a phone into a bathtub and toasted it.

    If I could guess, I would say that most people wouldn’t claim on this sort of thing more than once every five years. If that assumption is true then just saving the $7 per month would provide you with $420 to replace the phone. I think that is a much better deal.

    Mike

    • I agree that most people lose this “bet” because like any insurance company it has to win more times than it loses – otherwise it goes bankrupt.

      That 5 year number can’t be real though, at least not for me. I get a new phone each time I am eligible and often times much sooner than that (this I think bolsters your point).

      Notwithstanding I really believe it is the replacement cost that should be considered, because what would I have done if I didn’t have the replacement that is what I would have paid.

  3. Interesting post. Being the tightwad that I am, I don’t pay for telephone insurance because I know that the insurance company is going to come out on top for the long haul. We do basically what Kevin M recommends: pay for ANY extended warranty issue from our emergency fund and than pay the emergency fund back. This being said, I don’t want to come across as smug…I did drop my phone in the toilet last fall and found a replacement on E-bay. Life is never simple.

    • Insurance companies have to win most of the time! But that is not their point in your life. The reason you interact with an insurance company is to shift the risk.

      I did the ebay thing a TON of times, but this is the first phone that paid a good amount for and that is why I decided to shift my risk this time.

      If I were forced to do the ebay phone replacement this time, it would have been a huge downgrade. Would it have been the end of the world, nope! but would have sucked

    • I like to think this way too…but don’t you buy health insurance and phone insurance? At what point do you think you HAVE to get insurance as opposed to thinking that since the numbers dictate that you’ll come out behind, you shouldn’t buy.

      It’s definitely something I struggle with. Still, I don’t have the cell insurance. For a family of 5 it’s $25 a month. A $50 deductible means that if my $150 phone can last more than 4 months I’ll come out ahead.

      The odds of losing 3 phones in a year?? Next to nothing (especially because the 1 year warranty covers everything other than water damage, dropping, and losing a phone).

      • Daniel,
        Evan said something significant in his comment: the reason you interact with an insurance company is to transfer risk. Therefore, the rationale of what kind of insurance I buy is not based on whether the insurance company makes money (even though I put it that way in my comment), but on how much risk I can handle. I can be self insured with a cell phone or basically any extended warranty item (small risk I can handle), but not with my health insurance (huge risk I need to transfer).

        I hope this makes sense.

        • I completely agree, there’s only a certain amount we can handle before that “worst case scenario” becomes more than we can handle. In that case, the peace of mind is worth the money.

  4. Why not self-insure by transferring $7/month to a savings account when you buy the phone? Assuming you don’t break every new phone you get you’re probably safe. The $100 deductible kills the deal for me. But I get the free phone whenever I re-up my contract so I don’t care to have the latest, keep-up-with-the-Jones phone.

    • In my particular case I would have had $21 in my savings account LOL. I just re-upped in January so I could have tried to fight the good fight with sprint but it probably wasn’t going to work!

      • Yes, but surely this isn’t your first cell phone. If you’d started self-insuring with the first phone, how much would you have now? Or are you that clumsy you consistently ruin new phones? Not trying to be a jerk, just asking a question.

  5. My husband and I both have it but have never needed it. However, I am glad that I did insure my son’s phone. As we believe it fell out of his pocket at the theaters. Bum, had so many cute pics of our cats.

    Anyway, it was nice. Took me a few minutes via phone. They shipped a new one overnight. And all was done.

    So, I think with kids it is good to have cell phone insurance. :D

    • I always wondered about this – Cell phones got mainstream somewhere in between my Senior year of HS and sophmore year of College (I am 28)….At what age are kids getting cell phones now a days?

      • Ah, for me it was pagers in HS. 9th grade was prime for pagers to make it big. LOL.

        My son didn’t get his until 9th grade, but come Monday it is being removed for bad grades. My daughter, she is 9 now… may get hers in 7-8th. We’ll see. Although, she is vying for one now, there is no reason an elementary student needs to have a cell at school! ;)

        • Hmmm pagers in HS? If I had to venture a guess you have a year or two on me. Pagers were HUGE during my HS. Remember all those stupid codes? 143, 831? lol WOW

          ZERO reason an elementary student needs cell phone at school…Z E R O stay strong

  6. Sorry to hear about your damaged goods Evan, but I don’t think cell phone insurance is worth it. Unless something unfortunate like this happens to every phone you own, I don’t think the money warrants probability or risk.

  7. I’ve always avoided cell phone insurance. I was sorely tempted when I got my iPhone, but in the end I gambled as the insurance was so expensive (at least here in the UK).

    The trouble as ever is you swap an unknown potential cost for a known and very real cost. Never nice!

    I wouldn’t take a chance with my health or travel insurance, but I’ll gamble on a cell phone. ;)

  8. It used to be that the insurance was cheaper but I think many abused the insurance so the deductibles had to get higher.

    Its a shame that phones cost so much if you aren’t getting a new plan.

    I think you need to look at the phone you have and your habits. If the phone is expensive and you use it often, the insurance could be worth it.

  9. It’s worth it when people walk into a store and a: get mad they have to pay 35 to replace their phone, or b: have no replacement options and no upgrade and are sol.

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