Should you buy cell phone insurance?

You probably know someone who's dropped their cell phone in the toilet, left their iPhone in a cab or experienced some sort of cell phone mishap that left them disconnected. Would these people have benefited from an insurance plan? In most cases, insurance won't actually save you any money by the time you pay the premium and deductible. Experts say you can probably skip the insurance, but offer tips on how to protect yourself in case you do lose or destroy your phone.

AT&T, Verizon, T-Mobile and Sprint work with Asurion, a third-party insurance company. Their plans cover phone loss, theft and damage, including water damage. A manufacturer's warranty typically lasts one year from the date of purchase and is more limited, covering some product malfunctions, but not a drop in the pool. Warranties also generally don't protect against loss or theft.

A Consumerist editor who admits to "smashing his cell phone with his fist" in his claim with Asurion, blogs that he was quickly approved and had a new cell phone in hand the next day. While this is an extreme case, this is something a warranty clearly wouldn't cover.

What cell phone insurance costs

Cell phone insurance through Asurion costs about $5 per month with a deductible of $50 to $100, and must be purchased within 15 to 30 days of you buying your new phone. So, while the protection is solid, it comes at a price. If, for example, you have insurance for 8 months and then need a replacement phone, your out-of-pocket costs are anywhere from $90 to $140, and the amount only gets higher as the months go by. That's nearly as much as you might pay for a new cell phone anyway. Often, if you're willing to sign on for another 2 years, your carrier will work with you on the price. About.com's cell phone guide offers a few examples of how much you'll pay out-of-pocket to maintain cell phone insurance over the course of a two-year contract.

What the experts say

Just about every industry expert who's asked recommends against cell phone insurance in most cases. In an article at MSNBC, reporter Herb Weisbaum discovers the cons outnumber the pros, mainly because of the expense and the fact that you may receive a different model phone as a replacement -- often one that's refurbished. A representative from San Diego's Utility Consumers' Action Network tells Weisbaum that he receives a lot of complaints from people who bought cell phone insurance and then had issues when they tried to use it. Some of these individuals were upset to receive a refurbished phone as a replacement, while others balked at the deductible. A discussion at CellPhoneForums.net echoes these concerns.

In an article at BankRate.com, editor Tamara E. Holmes lists 10 reasons not to bother with insurance. "You probably won't lose the phone," is at the top. Holmes goes on to say that if you have a particularly expensive phone (upwards of $500 or so) it might be worthwhile. You might also consider purchasing coverage for a teenager who may not be as careful as you. While you might be tempted to buy insurance for the Apple iPhone, it can't be insured through AT&T/Asurion, perhaps because of its high value. Alternatively, you can buy an extended warranty from Apple for $70 that covers you for another year beyond the iPhone's standard one-year warranty. (This will not protect you against loss or theft, but includes tech support and repairs.) For the iPhone and other smartphones, you can also look into a insurance company such as Safeware, which covers a variety of small electronics.

Alternatives to insurance

If you're worried about losing or breaking your phone, there are ways to protect yourself beyond buying insurance. BankRate's Holmes recommends putting aside $5 each month in your piggy bank, rather than paying an insurance premium. Then, if you break or lose your phone, you can use that money to buy a new phone, adding the $50 or $100 that you would have paid for the deductible. She adds that if your phone survives two years unscathed, you now have $120 saved up. Others suggest checking eBay for a cheap replacement phone or stowing your old cell phone in safe place as a backup. You can easily reactivate the old phone, if needed. Suzanne Choney at MSNBC suggests contacting your home and auto insurance companies to see if they can cover your smartphone under a personal articles policy.