I read an interesting blog post about cell phone insurance over at LiveLikeYouAreRich.com.
The post brings up some excellent points about the fine print in smartphone equipment protection contracts, which mobile phone carriers offer for around $8 to $10 per month, per phone. However, I disagree with her assertion that they’re always a waste of money.
Incidentally, if you happen to drop your phone in water, try these tips before doing anything else. You may not need a new phone!
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The Fine Print
It’s true that cell phone insurance contracts usually come with strings attached, mainly a fairly large copayment – $149 for a high-end Android phone, $199 for an iPhone. Yes, that’s probably about the same amount you’d pay for a phone if you had to buy one, but that’s only if you are past your contract period and eligible for an upgrade.
And that’s assuming that you use a mobile carrier that still offers discounted phones in return for a contract (most don’t anymore).
If you drop your phone or otherwise damage it six months into a 24-month contract, and you don’t have an equipment protection plan, you’re stuck with a broken phone or with paying the full retail price of a replacement phone.
This happened with my husband’s phone several years ago. His Android smartphone was severely damaged four months after he bought it. A replacement phone would have cost about $500 without being upgrade eligible.
Fortunately, we were able to use the upgrade eligibility on my phone, so we paid the promotional rate for a new phone, $199, and I had to wait another two years to get a new phone for myself. If we’d purchased cell phone insurance on the phone, the copayment would have been about $149, and I wouldn’t have had to sacrifice the upgrade on my phone for the replacement of my husband’s phone.
I’m not saying everyone should buy cell phone insurance or not buy it. However, you should definitely read the fine print and understand what you’re getting for the money you pay.
In addition to a potentially hefty copayment if you need to replace a phone, you won’t receive a brand new phone, and they won’t repair your damaged one. You’ll most likely receive a refurbished (used) phone, even if your damaged one was fairly new.
Check Your Perks
One thing that doesn’t appear worthwhile to buy is an extended warranty, which only extends the manufacturer’s warranty and kicks in if your phone stops working for no apparent reason. A standard extended warranty doesn’t cover accidents, drops or falls. The credit card you used to purchase the phone probably already extends the warranty by a year, so check into this before paying for it.
Also, many Discover and MasterCard credit cards offer purchase protection on your phone, or anything else you buy with the card, for 90 days after purchase. This means if you drop your phone two months after buying it, you’re already covered, but it’s only for the first 90 days. Not every card has the same benefits, but it’s worth looking into.
For extended warranty or purchase protection coverage through a credit card, you’ll need to save the receipt for the purchase of your phone along with a copy of its warranty. I recommend scanning these into Evernote for safekeeping.
If you’re open to getting a new credit card, take a look at Wells Fargo. Their credit cards offer a phenomenal free benefit – mobile phone protection up to $600 with a $25 copayment if you pay your monthly mobile bill with your Wells Fargo card.
Alternately, you could buy a $99 two-year Square Trade Smartphone Accident Protection Plan which has a copayment of $99. This way, you are covered for an entire two-year contract without paying $10 a month ($240 over the life of the contract), and the copayment is much lower.
A few years ago, I bought a two-year Square Trade warranty on my daughter’s first generation Kindle Fire and had to use the service a couple of times, so it paid for itself many times over. I was stunned by their excellent service.
I didn’t have to wait on hold to talk to a human, and the replacement product arrived quickly. Amazon’s first Kindle Fire tablets apparently had batteries that were prone to stop accepting a charge, which is the problem we encountered which required the returns.
My daughter has taken really good care of her Kindle Fire, so we didn’t have any accident or damage claims. The issues were entirely mechanical.
I don’t usually spring for extended warranties, but kids and teens can be especially hard on electronic gadgets. Even some grown-ups seem prone to having problems with their smartphones long before their contracts are up.
Do You Have It?
If you do sign up for some type of insurance on your phone through your mobile carrier, be sure to check your account online to make sure you actually got it. Strangely, they don’t always enroll you in insurance, even when you ask for it.
After we had to replace my husband’s phone without insurance, I specifically requested insurance on the new phone. I noticed several months later – too late to enroll – that the phone didn’t have the insurance on it. I also requested insurance when ordering my latest new smartphone last year. I noticed later that the insurance isn’t there.
I’m kind of glad it’s not there, since replacing my phone under insurance would cost $149, plus whatever amount I’d already paid in monthly equipment protection fees. I just looked up what it would cost to get a refurb phone like mine on eBay.
Used phones like mine are selling for $130 to $200 on eBay. Gazelle, which buys and sells used smartphones and tablets, offers refurb phones like mine for $239. You can find many popular smartphone models on Gazelle, including iPhone 6 and Samsung Galaxy S5. Gazelle will also buy your good used smartphone or tablet when you’re done with it.
If you buy a popular iPhone or Android phone shortly after it comes out, even a used replacement may cost several hundred dollars. Without cell phone insurance or upgrade eligibility, as of this writing, a used iPhone 6 will set you back at least $400 to $500. A Samsung Galaxy S6 will run $600 to $700.
How About You?
What has been your experience with cell phone insurance? Have you had any experience with a broken smartphone and getting it replaced, with or without cell phone insurance?