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?