Is cell phone insurance really worth the cost?

Broken iPhone

A broken smartphone can cost you a lot of money - but not as much as insurance. Image: Flickr / Dave on Flickr / CC-BY-SA

Getting or replacing a smartphone can be expensive; more than $200 for even the most basic model. One of the questions sales representatives will often ask is if you would like to insure the phone. Is that insurance worth it?

The cost of insurance

Phone insurance will generally cost between $3 and $9 per month, depending on the type of coverage and the carrier. Assuming you replace the phone every two years, this means a final total cost of $72 to $216 over the course of two years. This insurance cost is on top of whatever deductible the cell phone carrier will charge to replace your phone if it is damaged, generally between $50 and $100. This means that if your phone is damaged six months after purchasing it, you could pay between $68 and $156 to have it replaced with the same model of phone.

A look at how cell phones are priced

There are usually two prices on almost any cell phone. The first price is how much the phone would cost if you bought it without a data plan and without any carrier support. For a brand-new, no-contract iPhone, this cost is usually $500 to $600. The second price is the price a carrier will charge you if you purchase the phone with a one- or two-year contract. The price is generally much lower, sometimes in the $100 to $200 range, because the carrier is getting the assurance that you will be paying your bill for the next two years. That assurance is enough that the cell phone carrier is willing to finance the purchase of your phone and roll the cost into your monthly cell phone bill. You will still pay full price for that phone, but you will be paying it in a different way.

Deciding if insurance is for you

You can run the numbers a dozen times, but phone insurance really comes down to knowing yourself. If you are not good at saving and tend to be tough on phones, then the additional monthly cost could be worth the money. Just take into account the fact that you will be receiving a phone that is the same or is equivalent to the phone you have currently purchased, not an upgrade. It could end up costing you just about the same amount to put the money in a savings account for your eventual upgrade costs.



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