Do You Really Need Cell Phone Insurance?

Do you want to add a 2-yr insurance plan for $99?

Do I Really Need Cell Phone Insurance

Nearly every cell phone dealer will ask this question when purchasing your shiny new smartphone. To some of us, we say no without thinking about it, refusing to pay anything extra and we go on our way hoping for the best. To others, it seems like a good purchase, and we assume the protection is good, so we select the add-on, and then go home wondering if we just wasted another hundred bucks.

Nearly all new phones comes with a manufacturer’s warranty, but that generally only covers equipment failure caused by a defect or malfunction. For most phone damages, this is not the case and you’re out of luck if the phone is stolen, lost, dropped or accidentally dropped in the toilet (face it, it happens).

Verizon Wireless says customers like cell phone insurance because they know if something happens to their phone, they’ll quickly have a replacement. In most cases, he says, it will arrive overnight and will be “exactly the same or similar” to the one you had.

But according to Consumer Reports, it is a waste of money. Generally, the replacement phones are refurbished models and the “phone insurance” comes with a deductible of $50 or more.

Insurance might make sense for some people like those who are prone to drop their phone, get it wet or somehow disable it. It can also be worth it if you are buying a high end phone that would cost $500 or $600 to replace, but remember your replacement phone is still likely used.

When it comes to insurance, the actual policy is not what you see in the colorful brochure or hear from the salesperson. The actual contract between you and the insurance company has numerous limitations and exclusions not spelled out in the sales material. For example, most policies will not cover “normal wear and tear” or a cracked display. The specific coverage is only for damage that directly affects the “mechanical or electrical function of the unit.”

Another fact to consider before signing on the dotted line is that your phone may already be covered by another one of your insurance policies. Theft or loss may be covered through your auto, homeowners, or renters policy. So before buying a cell phone policy, make sure you're not covered elsewhere. If you're unsure of under what circumstances your phone would be covered, check with your agent.

The moral of the story is that most consumers are better off foregoing the phone insurance and purchasing a used phone on their own if something happens to their original device. Many cell phone companies provide programs for users to trade up their phone every two years anyway, so as long as you can be careful for two years, it’s not worth the extra insurance.

By Matt Reynolds - Google+

No Comments