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Top 10 reasons not to insure your cell phone
Picture this: You're about to get a new cell phone when the salesman starts reeling off 101 reasons you should spend the extra $5 a month for insurance.
Should you protect your investment by purchasing the coverage that promises to replace your phone if lost or stolen? Experts in the wireless industry say no -- you're better off keeping your money in the bank.
If that's true, more than 50 million cell phone users are wasting $4 to $6 per month.
"Cell phone insurance never is a good buy," says Joe Kramer, business director for Phonedog.com, which bills itself as an "unbiased telecom comparison site." While many consumers think they're acting proactively to avoid shelling out money for new phones, what they don't realize is that there are many reasons it will seldom work out to their advantage. Here's our list of the top 10.
10. Exemptions in the fine print could leave you with nothing. Typically, cell phone insurance covers phones that are lost, stolen or accidentally damaged. But don't take it for granted the policy will pay under all circumstances. Some policies have a limit to the number of claims you can file for each year. Verizon Wireless, for example, allows only two claims in any 12-month period. Sprint will not cover damage caused by an attempt to change the phone's color, texture or finish, but it will cover damage from dropping, fire or water. Others will not cover water damage, and Cingular, for example, excludes specific phones, such as the AT&T Wireless branded models and the Nokia 6282.
9. You may have to jump through flaming hoops to collect. Also often hidden in the fine print are the required steps you'll have to take before your claim will be honored. "You may have to file a police report or you may have to jump a lot of hurdles," says Allan Keiter, president of MyRatePlan.com, a Web site that compares wireless services.
8. The phone's warranty may cover your loss for free. The cell phone insurance you're considering may be totally redundant with the manufacturer's warranty, which often offers the replacement of a malfunctioning phone. Or, the cell phone retailer may have its own replacement policy that is not contingent on insurance.
7. Other insurance may already cover you. If you haven't heard enough yet, consider the fact that you may already be paying for insurance to cover theft or loss through your auto policy or homeowner's or renter's policy. So before buying a specific cell phone policy, make sure you're not covered elsewhere, and figure out what circumstances the insurance won't allow for.
6. There's usually a deductible amount you have to pay first. The monthly fee is not all you should expect to spend if you lose or break your phone. Most cell phone insurance policies require consumers to also fork over a deductible, which generally increases with the cost of the phone. "It can go anywhere from $50 to $150 depending on the original cost of your phone," says Kramer. That means a consumer could end up paying between $170 and $270 to replace that lost or stolen phone insured for two years.
5. Insurance costs more than the phone is worth. Most cell phone service providers offer great phones at deeply discounted prices or even for free when you sign a service contract for two years. So after getting a phone for nothing why would you want to pay $100 or so to insure it? Consider the numbers. If you pay a typical amount of $5 per month for cell phone insurance, you've paid $60 in one year and $120 in two years -- the usual duration of a cell phone contract.
4. You may get an apple to replace an orange. To be fair, the insurance cost might not be so bad if you were guaranteed the latest top-of-the-line phone as a replacement. However, most insurance contracts stipulate that consumers receive a phone that's "comparable" to the one being replaced. In fact, it might not even be the same model. If you lose your phone, say, within two months of buying it you probably would make out all right because the replacement phone will be a recent model. However, if you lose your phone a year and a half after its purchase, you're going to be offered a replacement model that's a year and a half old. Because cell phone models, styling and features change rapidly,
"No one's going to want a model that's a year old, but that's what they're going to give you," says Keiter. So in effect, over 18 months you may well pay $100 to $200 (18 months x $5 = $90 insurance premium plus $50 to $100 deductible) to get an outdated phone not worth anywhere near that amount.
3. You may get a lemon to replace an orange. Worse yet, don't assume you'll be getting a new phone. "If the phone is replaced, it almost always is replaced with a refurbished phone, not with a new one," says Sue Macomber, consumer advocate with the Utility Consumers' Action Network, a nonprofit utility watchdog in San Diego. And there's no guarantee that refurbished cell phone is in great condition.
Macomber warns that her organization has received complaints from consumers who have received damaged phones through their insurance policies and she urges consumers who receive one to be on the lookout for defects. "One of the things people need to check for on a refurbished replacement is to see if there are little dots showing water damage," she says. Most cell phones have water-sensitive stickers inside the phone or on the battery that hold little dots that turn red if the phone gets wet.
2. Your peripherals may not fit. Even if the replacement phone is in good working condition, it may be a different model from the one you previously owned and that means your AC adapter, car charger, earpiece and other accessories might not work with it. "You may have to go out and buy new accessories for that phone. Those accessories could easily cost you more than the phone is worth," says Kramer. These items could cost $50 to $100, pushing the overall cost of insuring and replacing your phone far beyond what it would cost to buy a new one.
And (drumroll) the No. 1 reason not to buy cell phone insurance is ...
1. You probably won't lose the phone. Many people never lose or break their phones, so the money paid out for insurance is money down the drain. But what if you do? Try this instead of buying insurance: Every month you have the phone put the $5 premium money into a mayonnaise jar. If the phone is lost or stolen or completely breaks down, add the $50 or $100 that you would have paid for the deductible and go buy a new phone. If nothing happens to your phone, at the end of the two years you have an extra $120.
For klutzes only
Despite all these negatives, there are some people for whom insurance might be the best move, experts say. First, you might consider it if you have a very expensive phone. After all, the cost to insure a $500 phone is the same as a $50 phone. Next, teenagers may be less careful with their phones than adults, so they might be more likely to lose them or drop them. Even some clumsy adults may fit that profile. You should consider it, "If the phone is for a teenager or someone who has a proclivity to lose it or if you're a klutz," says Keiter.
Likewise, for the person who travels a lot or handles his or her phone a lot throughout the day, insurance may be reasonable, says Macomber. "It highly depends on the person's individual circumstances and their patterns of where they take their phone and whether or not they tend to lose keys and other things." http://www.bankrate.com/brm/news/insura ... nce_a2.asp
Picture this: You're about to get a new cell phone when the salesman starts reeling off 101 reasons you should spend the extra $5 a month for insurance.
Should you protect your investment by purchasing the coverage that promises to replace your phone if lost or stolen? Experts in the wireless industry say no -- you're better off keeping your money in the bank.
If that's true, more than 50 million cell phone users are wasting $4 to $6 per month.
"Cell phone insurance never is a good buy," says Joe Kramer, business director for Phonedog.com, which bills itself as an "unbiased telecom comparison site." While many consumers think they're acting proactively to avoid shelling out money for new phones, what they don't realize is that there are many reasons it will seldom work out to their advantage. Here's our list of the top 10.
10. Exemptions in the fine print could leave you with nothing. Typically, cell phone insurance covers phones that are lost, stolen or accidentally damaged. But don't take it for granted the policy will pay under all circumstances. Some policies have a limit to the number of claims you can file for each year. Verizon Wireless, for example, allows only two claims in any 12-month period. Sprint will not cover damage caused by an attempt to change the phone's color, texture or finish, but it will cover damage from dropping, fire or water. Others will not cover water damage, and Cingular, for example, excludes specific phones, such as the AT&T Wireless branded models and the Nokia 6282.
9. You may have to jump through flaming hoops to collect. Also often hidden in the fine print are the required steps you'll have to take before your claim will be honored. "You may have to file a police report or you may have to jump a lot of hurdles," says Allan Keiter, president of MyRatePlan.com, a Web site that compares wireless services.
8. The phone's warranty may cover your loss for free. The cell phone insurance you're considering may be totally redundant with the manufacturer's warranty, which often offers the replacement of a malfunctioning phone. Or, the cell phone retailer may have its own replacement policy that is not contingent on insurance.
7. Other insurance may already cover you. If you haven't heard enough yet, consider the fact that you may already be paying for insurance to cover theft or loss through your auto policy or homeowner's or renter's policy. So before buying a specific cell phone policy, make sure you're not covered elsewhere, and figure out what circumstances the insurance won't allow for.
6. There's usually a deductible amount you have to pay first. The monthly fee is not all you should expect to spend if you lose or break your phone. Most cell phone insurance policies require consumers to also fork over a deductible, which generally increases with the cost of the phone. "It can go anywhere from $50 to $150 depending on the original cost of your phone," says Kramer. That means a consumer could end up paying between $170 and $270 to replace that lost or stolen phone insured for two years.
5. Insurance costs more than the phone is worth. Most cell phone service providers offer great phones at deeply discounted prices or even for free when you sign a service contract for two years. So after getting a phone for nothing why would you want to pay $100 or so to insure it? Consider the numbers. If you pay a typical amount of $5 per month for cell phone insurance, you've paid $60 in one year and $120 in two years -- the usual duration of a cell phone contract.
4. You may get an apple to replace an orange. To be fair, the insurance cost might not be so bad if you were guaranteed the latest top-of-the-line phone as a replacement. However, most insurance contracts stipulate that consumers receive a phone that's "comparable" to the one being replaced. In fact, it might not even be the same model. If you lose your phone, say, within two months of buying it you probably would make out all right because the replacement phone will be a recent model. However, if you lose your phone a year and a half after its purchase, you're going to be offered a replacement model that's a year and a half old. Because cell phone models, styling and features change rapidly,
"No one's going to want a model that's a year old, but that's what they're going to give you," says Keiter. So in effect, over 18 months you may well pay $100 to $200 (18 months x $5 = $90 insurance premium plus $50 to $100 deductible) to get an outdated phone not worth anywhere near that amount.
3. You may get a lemon to replace an orange. Worse yet, don't assume you'll be getting a new phone. "If the phone is replaced, it almost always is replaced with a refurbished phone, not with a new one," says Sue Macomber, consumer advocate with the Utility Consumers' Action Network, a nonprofit utility watchdog in San Diego. And there's no guarantee that refurbished cell phone is in great condition.
Macomber warns that her organization has received complaints from consumers who have received damaged phones through their insurance policies and she urges consumers who receive one to be on the lookout for defects. "One of the things people need to check for on a refurbished replacement is to see if there are little dots showing water damage," she says. Most cell phones have water-sensitive stickers inside the phone or on the battery that hold little dots that turn red if the phone gets wet.
2. Your peripherals may not fit. Even if the replacement phone is in good working condition, it may be a different model from the one you previously owned and that means your AC adapter, car charger, earpiece and other accessories might not work with it. "You may have to go out and buy new accessories for that phone. Those accessories could easily cost you more than the phone is worth," says Kramer. These items could cost $50 to $100, pushing the overall cost of insuring and replacing your phone far beyond what it would cost to buy a new one.
And (drumroll) the No. 1 reason not to buy cell phone insurance is ...
1. You probably won't lose the phone. Many people never lose or break their phones, so the money paid out for insurance is money down the drain. But what if you do? Try this instead of buying insurance: Every month you have the phone put the $5 premium money into a mayonnaise jar. If the phone is lost or stolen or completely breaks down, add the $50 or $100 that you would have paid for the deductible and go buy a new phone. If nothing happens to your phone, at the end of the two years you have an extra $120.
For klutzes only
Despite all these negatives, there are some people for whom insurance might be the best move, experts say. First, you might consider it if you have a very expensive phone. After all, the cost to insure a $500 phone is the same as a $50 phone. Next, teenagers may be less careful with their phones than adults, so they might be more likely to lose them or drop them. Even some clumsy adults may fit that profile. You should consider it, "If the phone is for a teenager or someone who has a proclivity to lose it or if you're a klutz," says Keiter.
Likewise, for the person who travels a lot or handles his or her phone a lot throughout the day, insurance may be reasonable, says Macomber. "It highly depends on the person's individual circumstances and their patterns of where they take their phone and whether or not they tend to lose keys and other things." http://www.bankrate.com/brm/news/insura ... nce_a2.asp
. There are so much better things to steal.