Should I Pay for Cell Phone Insurance

Broken Smartphone with a smashed screen on a white background

When you purchase a new phone, your carrier will offer you cell phone insurance. The price, which can range from $8 to $15 per month, will vary by carrier and by the options you choose. Whatever the cost, insurance is intended to give you a replacement device in case your phone is lost, stolen or damaged beyond repair. The question most people have, though, is, “Should I pay for cell phone insurance?”

How does cell phone insurance work? 

Cell phone insurance works just like your other insurance policies. You pay a monthly fee so if something goes wrong–your phone is lost, stolen or damaged–you will get a new one.

However, there are some caveats. First, most companies only allow you to file two claims in a one-year period. If you do file two claims, you may be banned from the insurance provider for a full year after your second claim.

Additionally, you will not receive a new device for free, as you will have to pay a deductible, which can range from $100 to $200. While this may seem like a steep price, keep in mind a new iPhone 8 may cost $699, so you will be saving money. Once you have paid the deductible, the insurance company will send you a new or “certified like new” device.

What does cell phone insurance cover? 

Typically, cell phone insurance policies provide extended factory warranties and coverage for accidental damage, lost or stolen phones and out-of-warranty malfunctions, although coverage will vary from company-to-company and depend on which policy you purchase.

For whom is cell phone insurance a good deal?

People who have expensive smartphones are the best candidates for cell phone insurance. Since  some devices can now cost well over $500, the deductible will make replacing a lost or damaged call phone much cheaper. You may not think you will break or lose your phone, but accidents do happen.

Just like a new car, new smartphones can be expensive, and you may not have the extra cash on-hand. Thus, cell phone insurance can save you money in case of an emergency.

Whom should pass on cell phone insurance?

If you have a basic cell phone that will not cost much to replace, you may want to forego the insurance. When you crunch the numbers, your deductible and the amount you pay each month in insurance may be close to or even surpass the amount of money it would cost to replace your phone. In fact, you may end up spending hundreds of dollars on insurance that is entirely unnecessary.

Additionally, if you have had your cell phone for a few years, it is probably no longer worth paying insurance. There are a number of places, including Craigslist and Gazelle, where you can buy smartphones that are a few years old for as little as $100, which might be the same price you would pay for your insurance deductible. Be aware that the phone will be used or refurbished.

The question of whether to pay for cell phone insurance depends largely on your situation. Crunch the numbers of what a new phone would cost versus the total cost of insurance, and you will be able to make a more informed decision.

About Lynn Oldshue

Lynn Oldshue has written personal finance stories for BillSaver.com for twelve years. She majored in public relations at Mississippi State University.
View all posts by lynn