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Dear Liz: I read an article in which you recommended getting rid of cellphone insurance. Why? I thought that the insurance would be beneficial if something should happen to my phone.

Answer: You shouldn’t use insurance to cover costs that you easily could pay out of pocket. And if you couldn’t afford to replace your phone out of pocket, you’re spending too much on your phone.

Insurance is best used to protect against catastrophic expenses, not minor costs. When you use insurance to cover incidental expenses, you typically pay too much for the coverage — and that’s particularly true for cellphone insurance, which is ridiculously expensive for the protection you get. Plus, cellphone coverage is notorious for loopholes and exclusions that make it tough to make a claim should your phone be lost, stolen or destroyed.

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Categories : Insurance, Q&A

2 Comments

1

I know that a lot of people don’t like insurance for various reasons. I didn’t use to care for it, but after you lose your smartphone once, it makes you think twice. The last time I got a new phone, they offered me a 3rd party insurance coverage. The hard part was coming up with the additional $130 upfront but what sold me on it was their buy back program. They said they’d be willing to buy my phone back when I’m ready for a new one for about $135 so I figure that even if I don’t use it, I get my money back and it doesn’t cost me a single penny to be protected in the long run. The also set me up with a software to lock, locate, and wipe my Android device in case i ever lose it. Again, I know insurance isn’t for most people, but I’m happy with the one that I got. The store had me go to http://www.mycellphoneinsurance.com if anyone is interested. I didn’t add it at first but then when I saw my youngest son get a hold of it and just throw it, I figured it wouldn’t be a bad idea…

2

If you are considering cell phone insurance, read the contract carefully. Find out what the deductible is, what triggers the coverage (sometimes significant damage, like a cracked screen, isn’t enough if the phone still works), whether the insurer promises replacement or “replacement or repair” (which could mean a long wait for a new phone). Also, keep in mind that this insurance is offered by a third party. If you have a dispute with it, your carrier may not be much help (even if the carrier recommended the insurer).