Is Cell Phone Insurance A Rip-Off?

If you’ve just bought an expensive smart phone, you may be considering getting it insured.

Cell phone insurance plans starting at a small amount like $6.99/month might seem like a good idea, but is shelling out for insurance worth it, or is it simply a rip-off?

Financial sources indicate that there are a few circumstances in which cell phone insurance pays off. For example, if you lose your smart phone only a few months after having purchased it, your insurer can help you replace your phone for less than it would cost if you weren’t insured. For this reason, cell phone insurance might be a good idea for someone who has a track record of breaking or losing phones.

Hang on to your old phone in case you lose your break your smart phone
Image provided by flickr creative commons user ellenm1.

However, in most instances it seems that cell phone insurance hurts the consumer’s wallet more than it helps.

Fine Print:

For starters, insurance plans often come with a good deal (sometimes pages and pages) of fine print, which should be read through carefully.

Sometimes this fine print might contain an agreement on the insurer’s part to replace your phone, but with what might turn out to be a used phone or a different model to be determined at the insurer’s discretion. This caveat might apply when trying to replace a new, in-demand phone, or an older model that is no longer manufactured.

Some experts say that these contracts are usually loosely written to give insurance companies ample leeway in dealing with individual cases.


Depending on the insurance plan, the consumer might be responsible for a deductible as high as $199. For that amount, you might be able to find a replacement phone on eBay or a refurbished phone.

Alternatives to Insurance Plans:

Instead of spending money on a cell phone insurance plan, experts suggest:

  • Simply setting aside the money that you would be spending on a plan in an emergency cell phone fund
  • Investing the money that you would be spending on a plan
  • Asking your insurance company about adding a plan onto your existing homeowner’s insurance
  • Use an older or cheaper phone until your contract expires

When buying a new smart phone, be wary of “peace of mind” insurance offers. Read contracts carefully and consider realistic alternatives.