Are Cell Phone Protection Plans a Scam?

Money

It is still within recent memory that cell phones were just that—phones. Those days are long gone, however, and for most of us, our cell phones are essentially mobile computers. They not only hold all our contacts, call records, and voicemail, but also our photos, calendars, email, music, videos, texts, internet history, social media, notes, Bejeweled Blitz high score, and much more. Sure, those things are all backed up to a Cloud or your laptop at home, but for most people, being without a smartphone is akin to being set adrift at sea without food or water.

Not only do we think we are unable to live without all of the things our smartphones provide us, but from a strictly financial perspective, losing or breaking a phone can be a huge punch in the wallet. Smartphones cost hundreds of dollars to replace, and if you’re going to shell out that much money for a piece of electronic equipment that you are using constantly and that is also rather fragile, you would think it makes sense to insure it.

Or does it? Sure, if you drop your phone into the toilet or your cup of coffee, or leave it on the bus, getting it replaced without any hassle sounds great. Unfortunately, though, it’s not that easy or cheap. Here’s what the experts say:

Is It Catastrophic?

According to finance expert Liz Pulliam Weston, insurance is something that is for catastrophic expenses that you would never be able to cover on your own, such as car, medical, life, and homeowner’s insurance. Most phones are inexpensive enough that shelling out for protection plans is not a particularly good financial decision, although Weston does acknowledge that replacing some of the higher-end smartphones almost qualify as catastrophic expenses. Replacing an iPhone, for example, could cost you $650 or more if you’re mid-contract. But unless you own a newer iPhone and are a supreme klutz, you might be better off buying a protective case and passing on the protection plans.

Carrier Policies

When deciding whether to buy a policy for your phone, it’s important to understand that not all protection plans are created equal. Many people choose the obvious option, which is carrier insurance, a monthly fee paid to AT&T or Verizon that includes replacement for loss, theft, or damage. However, these plans will cost you between $7 and $15 per month, which adds up to $168 to $360 over two years, and often times the fine print excludes things like water damage or everyday wear and tear. In addition, you can be hit with a high deductible before they’ll pay out, and you could end up with a refurbished replacement phone instead of a brand new one. Carriers may also limit how many times you can replace your phone. Many experts say carrier policies are the worst deals out there for phone insurance and you’re better off without them.

Store Protection Plans

If you buy your phone at an electronics store like Radio Shack or Best Buy, you can buy a protection plan from the store. These plans are similar to carrier plans, however, and are rarely worth the price you pay. For example, Best Buy’s plan is $14.99 per month or $299 up front for two years, but excludes loss, theft, or damage from full submersion. (Dropping your phone in the toilet is, apparently, the most common cause of damage, by the way.) If you do damage your phone, Best Buy can take up to three weeks to repair it, and you’ll be asked to pay a $150 deposit on a very basic loaner phone while your phone is being fixed.

Independent Insurance

SquareTrade, Protect Your Bubble, and Asurion are all companies that let you buy varying levels of protection for your phone and are usually a better deal than carrier or store plans. Generally, experts don’t recommend bothering with insurance unless you have a new iPhone. But if you do, SquareTrade is thought to be the best deal of these types of plans, unless you want loss and theft covered as well, in which case Protect Your Bubble is recommended.

What About AppleCare+?

AppleCare+ is the extended warranty sold specifically for iPhones, and most tech experts agree that it’s a pretty good deal, especially if you are likely to drop or otherwise damage your phone. It costs $99 to purchase and, with it, you get a new replacement phone if yours suffers any kind of damage, including submersion, for just $49. The caveats for AppleCare+ are that you are limited to two replacements during the two-year coverage period, and it does not cover loss or theft.