I don’t have a good track record with cell phones. After about a year, my first one drowned when I was changing in a bathroom stall. The second one made it through the end of that contract. I had taken out cell phone insurance, which made it fairly easy to replace. Then we switched carriers, got a new contract and I decided to add the insurance again.

Sure enough, two weeks ago my phone quit working. (Nothing’s been wrong with Micah’s, but my phone had been acting up for a while.) So we went through the insurers again. I’m a bit more aware of financial matters this time around, so I asked myself the question “Would it be better to self-insure next time?” Not this time, obviously, because I wouldn’t have been saving.

With the Cell Phone Insurance:

$5/month/phone. $10 month.

2 year contract means that we’re paying $240 for the two phones’ insurance.

Ok, now if you want to replace a phone, you have to pay an extra $50. I suppose that’s to keep people from defrauding them. And you get the closest match to what you’ve got.

The new cell phone I got would cost $200 without the insurance or a new 2-year contract. It’s also one of the least expensive models out there.

If I Self-Insure the Cell Phones:

That’d be $240 that I wouldn’t necessarily have to give to someone else. Plus another $50 if I need to replace a phone.

However, I might not have all that money up front. I think new phones are covered by warranty for a period, but after 3 or 6 months or for non-warranty issues, I could end up paying a lot out of pocket. For instance, if the phone drowned at 6 months, I’d have $60 saved.

Even if you add the $50 I would have had come up with anyway, it still means $90 more to find. At one year, even counting the $50 I would still be short. At the end of 15 months (when mine died) I’d have been just even, including the $50.

Also, if we needed to replace both phones, the insurance + replacement fee would be $340, a $60 savings. Micah’s done well so far, but that’s no guarantee that something won’t happen. Or a phone might need to be replaced twice. Or both phones twice.

Another Option for Replacing Cell Phones:

I could always have renewed the contract. I like the idea of being contract-free, but I also don’t know where I’d go if I had to find a new provider. Verizon, my first one, was not satisfactory and the Cingular/ATT experience hasn’t thrilled me either. I wonder if the second was partially influenced by my phone dying so much near the end. Or if it helps that these companies don’t like to cover the nation’s capitol of all places (though I hear Verizon works in the tunnels).

Anyway, I like my freedom to threaten to change.

What are the advantages of each insurance plan?

– If I buy insurance, I don’t have to worry about more than keeping that $50 handy for replacement. (negative thought—but I might throw money down a hole)

– If I self-insure, I can earn interest on the money and may never have to pay it. (negative thought—I might end up needing to replace it early and thus be pressured into the next one)

– If I get a new plan with a free/cheap phone included, I have to come up with the initial cash but do get a rebate. So the phone costs much less than either the insurance or the self-insurance (negative thought–I might get a plan I don’t like. I’d have to stick with the same people to avoid early termination fees…most of the time.)

What I’m thinking for now:

Our contract is good through November. In November, I may decide to self-insure with the backup of getting a new contract if the phone dies early or if a second one needs to be replaced. I’ll double check with the people that you can get a new contract with them any time…I believe this to be the case, it’s in their best interest.

If I had just one phone, I’d buy the insurance because the most I’d pay in two years would be $170. I could save up $120 by self-insuring and come up with the other $50 that I’d have to provide anyway, but that’s still more than most phones, even the cheaper ones.

Or we could switch to pay as you go plans. Sometimes I think it’d make more sense…I’ll evaluate our calling habits for that too this November.

Have you got insurance on your cell phone? Have you needed it like me? What would you do?

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Will Replace An Uninsured Cell Phone Cost a Lot?
May 15, 2008 at 11:01 am
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July 26, 2008 at 2:38 pm

{ 18 comments… read them below or add one }

BeThisWay March 9, 2008 at 11:13 am

No, I do not carry insurance on my cell phones. Over the 10 years or so I’ve had insurance that’s saved me $600, and since we added Husband’s phone 6 years ago that’s another $360. The only time I’ve had to replace a phone was at the end of a contract anyway, and that was free after the rebates with a new contract. I think that unless you’re really accident prone you’ll almost always save money in the long run by not insuring.

That said, if you are more comfortable with insurance and you have a two or more phone family, I’d probably still only insure one phone because the chances of more than one phone needing replacement in any given year has got to be pretty small…

That’s how I see it.

SJean March 9, 2008 at 11:54 am

I don’t have insurance. I don’t know if you can just get a new contract + new phone whenever you want (not sure).

I lost my phone awhile ago, and found someone with an old spare they were willing to let go. You can also buy a used one cheap at a thrift store or online (that is what my dad has done). This only works if you aren’t finicky about the model.

Looby March 9, 2008 at 12:21 pm

I’ve never had insurance on my phone, I know my parents have at least one old phone lying about that I could get if I needed, and my S/O is using my old phone since his died. As SJean says if you aren’t picky about the model, someone probably could help you out. Also Craigslist and ebay have lots of phones for cheap/free. For cell phones I don’t think insurance is worth it.

brando March 9, 2008 at 12:34 pm

Never! I have three lines/phones and don’t have insurance on any of them. The one time a phone failed on me (in 2002), I went straight to eBay. Picked up the exact same, albeit used, phone for less than $35. It wasn’t a high end model by any measure, but it does the job. Over the years, I’ve taken advantage of each line’s upgrade (I’m fine with the contract and have actually had a great experience with Sprint) getting phones for little or no money. Now I have a few backup phones in case anything goes wrong. All three phones could fail right now and I’d have a working backup.

E.C. March 9, 2008 at 1:14 pm

I use Tracfone’s prepaid service since I don’t use a cellular phone for more than a few minutes most months. My first phone died for no apparent reason within a month and a half of purchase and was covered under warranty, and if the replacement dies, I think I can go to Target and buy an identical phone for $15. I can afford to self-insure.

Steven March 9, 2008 at 1:28 pm

I don’t have insurance.

Depending on your carrier, you may be able to pick up a cheap “emergency” phone.

I use T-Mobile, and I keep an eye out for the T-Mobile TO GO (their prepaid plans) phones on sale. I got one for $15 last year.

If my main phone dies, I can put that SIM card in the TO GO phone and I at least have the basics of calling working. Then I can check out getting a better phone at my leisure.

plonkee March 9, 2008 at 2:39 pm

I self-insure. If I lost my phone, I’d probably get a refurbed one for not very much money. And then wait for new contract time when they’re free.

Andrew Stevens March 9, 2008 at 2:45 pm

You should buy insurance only for events which would financially embarrass you, since insurance always expects to make at least a small amount of money, i.e. you pay a premium for the protection.

Life insurance (for breadwinners with dependents) is an obvious one. Catastrophic health insurance is another obvious one. (The problem with modern health insurance, and the American system in general, is we expect it to pay even for routine doctor’s visits.) Liability insurance on a vehicle is an obvious one and insurance on the car itself might be a good idea. (I don’t have it since I could easily afford to pay cash for a new car if our current one dies.) Renter’s insurance might be a good idea. However, for small items, you should not bother with “insurance” or “extended warranties” or stuff like that. You should have a well-stocked emergency fund instead to cover all such problems.

However, like all insurance, there is an anti-selection bias here. You know yourself better than they do. If you know you’re going to abuse your phone, insurance might be a good idea. Keep in mind that they know about this anti-selection bias as well and the premium is higher to cover it.

mrsmicah March 9, 2008 at 4:31 pm

Lol, Andrew, I don’t exactly abuse it…but I certainly seem to have bad luck with it.

We’re seriously considering the pay as you go plan for the next time around. We got this one because we were in a long-distance relationship and needed minutes (or free in-calling, actually) to be able to talk with each other. But now we hardly ever use them.

Jay March 9, 2008 at 5:27 pm

My #1 daughter had her phone stolen twice while insured. After the second time, we were dropped from that insurer and had to go with a more expensive option. Given her penchant for leaving her phone different places, we’ve continued to insure. Daughter #2, uninsured, drowned two phones (don’t ask), but she found a cheap online replacement for the second one since the money was coming out of her pocket!
Guess the choice to insure is equivocal at best.

Kim March 9, 2008 at 9:32 pm

I do not insure my phones but I’ve had a lot of luck with the ones I’ve had over the past 17 years (eeck…telling my age there – the first one was in a huge bag lol). I’ve only had one break and luckily it was 2 days before I could get another one for free.

You can buy used phones on Ebay. There will be serial numbers on them, you just need to check with the carrier that the phone was not one that was associated with a delinquent account. Sometimes they’ll make you pay the activation fee on the used phone, sometimes not, it just depends. Sprint has never charged us (my Dad breaks his phones a lot) but I have friends with Cingular who has been charged.

We also as a family choose the same phone. That way we have 6 of the same one, if a phone breaks we can use the battery in the next one (and keep the extra chargers).

Kathy@brazoscowgirl March 9, 2008 at 10:40 pm

Okay here is what we do, which is odd because of the way my family is. We have two teenagers(IMHO must have insurance), so we have the insurance on them. I did have no insurance on the oldest, but we had to find a phone in a hurry he was going on week long trip. Ebay was not a go then. Middle has not had a phone is terrible on his shoes, so far he has not lost it though. Hubby is awful on his phone, his boots you name it Now you know where W got it. Hubby doesn’t want to wait one minute without a phone, so he has insurance. Our plan is a 5 person plan. My mom has no insurance, she is a responsible user thankfully. I don’t have insurance I bought my last replacement on ebay. So you have to figure out what is going to be cheapest in the long run. Ebay doesn’t have the best phone cheap unless they just released the Iphone.

We are on Verizon for one reason, it works on the farm which is where we really need to call someone up in the field. We have tried other companies but no one has that much coverage.

Sistah Ant March 9, 2008 at 11:14 pm

I used to have insurance until I realized it was a waste of money and the deductibles are too high.

I now self-insure by keeping a spare phone that I can put my SIM card into if my primary phone conks out.

dreamy1 March 10, 2008 at 11:14 am

I got insurance on my phone, mainly because I have a smart phone. I dropped it from about waist high one day during a breast cancer walk. The screen broke, and it basically rendered the phone useless. Thank goodness it was JUST under the 30 day return period so they just exchanged the phone for me. Now I have the insurance and an extra phone to put my SIM into in the event I need to use the insurance to replace my phone.

Jeff March 10, 2008 at 11:35 am

I too have elected insurance for our two phones, mainly because they are our only phones (no land lines). Plus with sprint if you don’t have insurance and something, even warranty wise, happens to the phone they won’t replace it and you have to fight with the original equipment manufacturer. For the piece of mind it is worth the extra 7.00 per month.

kay March 10, 2008 at 5:02 pm

I think it’s only useful for very expensive and luxury cellphones.

Becca March 10, 2008 at 11:07 pm

To be honest, Green Line has been hit or miss for me as far as Verizon service goes. I don’t know if it is just my tower updates or what, but I have to desperately hope I get service at a stop in order to send text messages. I wouldn’t count on it in terms of picking a contract.

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