Do You Know How to Insure Your Smartphone?

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My smartphone was stolen recently. What I learned was that mine was a classic story, according to this report on phone theft (by IDG Research for data security company Lookout):

  • It happened in a crowded cafe:16 percent of phone thefts — the biggest percentage — happen in restaurants.
  • I’d turned my back on the phone: Most — 44 percent — are stolen when owners left them behind in a public setting.
  • The thief struck during the lunch hour: The majority of thefts — 40 percent — take place from noon to 5 p.m.
  • I lost more than money: Dealing with the loss, buying a new phone and importing backed up data ate up half of a workday — 47 percent of victims told the pollsters that their phone theft cost them in lost time or productivity.

So as it happens, I’m in good company: 10 percent of phone owners in the United States, U.K., France and Germany have had a mobile phone stolen, the report says. In my case, making it all worse, I was uninsured.

Insure? Or not? How to decide

Was it a bad idea to go without insurance in a world where phone theft is common? At first it seemed so. I got right on the phone to my insurance broker and spent $41 a year to have my new phone added as a “scheduled” item to my home insurance policy. That works out to $3.41 a month, plenty cheaper than the $11 it costs, for example, to insure a 64-gigabyte smartphone with Verizon’s top-tier “Total Protection” plan, or even the $7 that ATT charges for insuring a smart phone.

But it’s not fair to compare my homeowner’s coverage to dedicated phone coverage. Phone company insurance plans and other third-party plans — depending on which you select — usually protect you against more than just theft. Typically, these plans also cover repairs or replace a phone in case of a malfunction or accident or even water damage.

Taking a risk

Should I have gone with a fuller coverage plan from my phone carrier? Looking into it, I learned that there’s no one-size-fits-all answer when it comes to mobile phone protection plans. Not only do the plans vary widely, so do people’s circumstances.

For me, I decided that my new home insurance coverage was best. But that’s me. My thinking went like this: Full-protection coverage offered through phone companies, phone manufacturers and third-party insurers tend to have high deductibles for smartphones. I’d have to pay a $199 out of pocket to replace my new phone if it were lost or stolen. Some plans charge plenty more, as CNET explains, below.

My home insurance coverage for the phone, though, has a zero deductible. No cost to make a claim. It would take nearly five years, at $41 a month, to equal the cost of my $199 deductible. And that doesn’t include the monthly premiums for the full-protection plan.

But what about coverage for malfunctions and accidents? Since my new phone came with a one-year warranty, I’m covered, for now at least. I had a 60-day window in which to purchase an extended warranty, but I let it go. Add-on service plans seldom are worthwhile, Money Talks News founder Stacy Johnson has found, and so I’m taking my chances.

Should you buy smartphone insurance?

Whether phone insurance — of any type — is a good deal or not is a very personal call.

CNET lists drawbacks of phone insurance plans, including high deductibles:

Month-to-month phone insurance comes with low premiums, high deductibles and a limit on claims (Asurion (a popular provider) lets you make two claims per year, with a cap of $1,500 per claim). If you make one claim per year, you’ll pay between $270 and $330 for a new phone — and the phone may not even be new. The insurance company has the right to choose whether they want to repair your phone or replace it with a phone of equal value, which means you’re likely to get a refurbished phone instead of a brand new one. If your phone is more than a year old, phone insurance makes no sense because older high-end smartphones are subject to the same deductibles as newer high-end smartphones.

The value of any particular plan depends on:

  • Replacement cost: If you own one of the high-end smartphones you may be looking at $800 or more to replace it, making a full-protection plan more attractive, even with a deductible of $199 or more.
  • The age of your phone: The older your phone the less valuable it is and the less a protection plan makes sense.
  • The plan: The value of any plan depends on its price and features.
  • Where you live: If you live in an area where phone theft is a big problem, the case for coverage grows stronger.
  • You: Are someone who has a track record of dropping or breaking things? If so, coverage may be a good idea, at least for the first year or two, when replacing it is most expensive.

There’s no simple answer to the quandary over whether to buy smartphone protection. But knowing how to think about the decision makes sense.

What’s your approach to protecting your phone and the information it holds? Share with us in comments below or on our Facebook page.

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