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Most adults in the U.S. consider a cell phone to be one of life’s essentials. We’re so reliant on our phones that losing or accidentally damaging a cell phone would constitute a major crisis. And because cell phones can be expensive, many Americans couldn’t afford to replace a cell phone right away. That’s why phone insurance can seem like an appealing option. Here’s what to know about phone insurance.
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Phone Insurance Basics
Like other forms of insurance such as life insurance, phone insurance is a hedge against risk. Specifically, phone insurance provides some protection against the loss, theft or destruction of your phone. Phone insurance may be offered to you when you buy your phone through your provider. Alternatively, you can buy a separate phone insurance policy.
Many phone plans and phone purchases come with basic phone insurance, through the phone manufacturer, the phone service provider or both. Generally, these built-in forms of insurance cover things that are the manufacturer’s fault. If your phone simply stops working, you’ll probably be able to get a new one at no cost.
But what about phone-related misfortune that isn’t the result of a manufacturing default? If you drop your phone in the bath tub, leave it at a restaurant or discover that someone has stolen your phone, what do you do? In most cases, your phone plan doesn’t come with built-in protection against these eventualities. You won’t be able to walk into, say, Verizon and ask for a new, free phone because you dropped yours on the sidewalk. But if you purchased additional phone insurance, whether through your provider or from another company, you would be covered against loss, theft and damage. Your phone would be repaired or replaced with a refurbished phone.
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Is phone insurance worth it?
Phone insurance can add a significant expense to your budget. Like health insurance, phone insurance generally comes with both monthly premiums and a deductible. Phone insurance deductibles are usually around $200. The deductible is the amount you must pay before the insurance kicks in. Phone insurance plans generally limit the number of replacement phones you can get – so if you’re a chronic phone-loser, your policy might cut you off.
So is it worth it? Well, you may already have some coverage for your phone. Some phone plans come with built-in phone insurance, so before you evaluate whether to buy an add-on policy, take a look at your current plan to see whether you’re already covered. It’s also worth taking a look at the terms of your credit card, which may offer an extended warranty on your phone if you used the card to purchase the phone. And if you have homeowners insurance or renter’s insurance, take a look at those policies, too. Your phone might be covered through your homeowners insurance or renter’s insurance policy.
If you don’t have phone insurance, deciding whether to buy an add-on policy is largely a question of your comfort with risk and your budget. If you pay for phone insurance and nothing happens to your phone, you will have lost the money you spent on premiums. On the other hand, if you opt out of phone insurance and your phone is stolen, you’ll have to come up with the money to replace your phone. You won’t automatically get a refurbished phone, as you would if you had phone insurance coverage.
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If your phone is lost, stolen or damaged, you might want to dip into your savings to get a new, used or refurbished phone as a replacement. If you have some liquidity in your budget in the form of cash savings, opting out of phone insurance and buying a replacement phone could turn out to be a cheaper option. Before you decide, consider your budget and the likelihood that something might happen to your phone. If you do opt for phone insurance, look for an affordable option with a short (or non-existing) waiting period. Policies with waiting periods leave consumers out of luck if their phone is lost, stolen or damaged before the policy kicks in.
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