We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. Learn more.

  1. Insurance
  2. Insurance Policy

Is Cell Phone Insurance Worth It?

By:
Kerri Anne Renzulli
4 min read
- Patrick Strattner—Getty Images
Patrick Strattner—Getty Images

It may sound like a good idea to pay a little extra each month for the security of knowing you could get a replacement phone any time you need it. But month-to-month cellphone insurance isn't always the helpful solution it appears to be.

High deductibles, policy restrictions, and limited replacement options can make the plans less desirable, industry watchers caution: "95% or more of the time, cell phone insurance is not worth buying," says Logan Abbott, president of Wirefly, an online comparison shopping tool for cell phone plans.

If you are considering a plan, make sure you understand a few key things.

Who you can buy insurance from

If you do want to buy insurance, you have two basic options: from your wireless provider or from a third-party company such as SquareTrade. Insurance offered by wireless providers tends to be more robust, covering device malfunction, damage, loss and theft, but it tends to cost more — roughly $10 a month for full insurance, although some providers offer tiers with more limited coverage. (Verizon, for example, offers four insurance tiers ranging in price from $3 to $11 a month.) Third-party insurers typically cover only malfunction and damage — which is fine if you drop your phone in a puddle, less so if it gets stolen — and tends to cost $7 a month.

How big a deductible you'd face

No matter who you buy from, you'll still wind up paying a deductible for each claim you file — and that can come as a nasty shock. "Most people when they sign up for these insurance plans don’t realize there is a fairly large deductible. They assume the monthly payment is it," says Abbott. The deductible on wireless carrier plans typically ranges from $50 to $200, Money finds, depending on the kind of phone you own and how new it is. If you've got a brand-new iPhone, expect to be at the top end of that deductible range. Third-party insurance providers offer a lower deductible — $99 for SquareTrade, for instance — but, remember, they also cover fewer types of incidents.

Some companies, such as AT&T, reward you for not filing a claim by offering a deductible discount. Six months without incident allows you to save 25% to 50% off the standard deductible.

What replacement phone you could get

If your phone cannot be repaired, most insurance policies say they will provide you with a replacement that is generally comparable to the device you had — but you might not even get the same model or brand as before, and you may wind up with a refurbished phone rather than a brand new one. SquareTrade says it will either repair your phone or give you a reimbursement amount based on the retail value of the phone for your carrier.

What your bottom line will be

All of this means that, even if you have to make a claim, there's a good chance the insurance won't have been worth it. Let's say you got a smartphone last year, paid $10 a month for the first year of insurance, then lost the phone. You already spent $120, your deductible is probably another $200, and your insurer could give you a refurbished version of last year's model rather than a new phone. Add in the fact that phones typically come with a manufacturer warranty for the first year — and are becoming much more durable — and "there is less and less of a reason to get insurance," Abbott says.

For more Money coverage, check out The Best Cell Phone Plans of 2016.

Tags