Do You Need Insurance for Your Smart Phone?

When you buy a smart phone, you might get the hard sell to pay a little extra each month for a protection plan for your device. The question, of course, is whether it’s worth it.

Although extended coverage typically doesn't pay off for major appliances and electronics, it might for smart phones. According to Verizon, 25% of Americans lose or damage their wireless phones every year. The limited warranties that come with most smart phones don’t cover loss or accidental damage, which means you would be on the hook for a pricey repair or a replacement phone that could easily cost $600 or more.

Homeowners and renters policies provide protection for possessions, which would include smart phones, but only if they’re stolen or damaged by a covered event such as a fire. However, if your home's insurance deductible is high – a $500 deductible is common – then it wouldn't make financial sense to file a smart-phone claim. And a homeowners policy wouldn't cover the cost of replacing a phone if you simply lose it or damage it, says Jeanne Salvatore, a spokesperson for the Insurance Information Institute.

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A phone purchased with a credit card would usually have 90 days of purchase protection, which would cover damage, loss or theft, says John Oldshue, LowCards.com founder and editor. And many cards will extend the manufacturer’s warranty. However, each card network's plan has its own caveats and exclusions. So check your issuer’s policy for details. Regardless, an extension of the manufacturer’s warranty won’t do you much good if that warranty doesn't cover loss or damage.

Here are your options if you want more protection. Whether it's worth the extra cost comes down to personal factors that you will need to evaluate for yourself. Are you especially clumsy or forgetful? If yes, lean toward added coverage that will fix a dropped phone and replace a lost one. More importantly, ask yourself if you can afford to replace a lost or damaged phone? Ironically, it's those who can't afford to shell out $600 all at once for a new phone who might benefit the most from the added protection that can be had for just a few dollars a month.

Extended manufacturer’s warranty. Apple offers an extended warranty, called AppleCare+, for iPhones. For $99, you get two years of technical support and coverage for two incidents of accidental damage (subject to a $79 service fee for each claim). The coverage provides repair or replacement for your phone, battery, included earphones and accessories.

Protection plan from a wireless provider. All of the major carriers – AT&T, Sprint, Verizon and T-Mobile – offer plans that cover accidental damage, out-of-warranty malfunction, loss and theft of a smart phone. To get the coverage, though, you have to enroll within 30 days of the purchase or activation of your phone (just 14 days for T-Mobile). All of the plans limit claims to two a year and have a deductible that varies depending on the phone.

AT&T Mobile Insurance is $6.99 month and has a deductible per claim of $50, $125 or $199 depending on the phone model. For $3 more each month, you can get enhanced customer support, GPS tracking for a lost phone and the ability to remotely lock it with the Mobile Protection Pack.

Sprint Total Equipment Protection covers virtually anything that can go wrong with your device – including loss, theft, damage and out-of-warranty malfunction – for $8 or $11 a month, depending on device. The deductible ranges from $50 to $200.

Verizon’s protection plans range in price from $5.18 a month to $10 a month, and the deductibles vary depending on the phone model. The highest level of protection, Verizon Total Mobile Protection, covers lost, stolen, damaged or defective phones and provides GPS tracking for a lost phone and virus protection.

T-Mobile Premium Handset Protection covers malfunction, damage, loss or theft for $8 a month. The deductible varies depending on the phone model.

Protection from an independent warranty provider. You might pay less for an extended warranty from companies such as SquareTrade and Safeware. SquareTrade charges $5 a month for 24 months (or $99 upfront to cover the entire 24-month period) and has a $99 deductible. It covers damage and malfunction, but it does not cover loss or theft. Protection plans are available only for phones that are 30 days old or less, or that are currently insured by a service provider’s plan. Safeware’s policy cost depends on the amount of coverage you want, the device you insure and the state where you live. It does cover theft, in addition to damage and malfunction.