Is cell phone insurance worth it?

Key Points

• With cell phone insurance, your insurer agrees to pay for damage to your device in exchange for a monthly premium.
• Cell phone insurance typically covers loss, theft, damage and mechanical failure.
• Devices are getting more and more expensive, so cell phone insurance may be worth it for many people.

Ever cracked your cell phone screen? Dropped it in a pool? That little device that we can no longer live without comes at a high price and chances are you’d benefit from insuring it.

“Cell phone insurance can be a great way to protect your investment, but it is important to understand the terms and conditions of your policy before you purchase it,” says Samantha Hawrylack, a personal finance expert and the co-founder of How To FIRE.

How does cell phone insurance work?

Cell phone insurance works largely like any other type of insurance. You sign up for a policy with a cell phone carrier, insurance provider or another company. In return for your monthly premium, the insurance company agrees to compensate you for some or all of your losses for a covered incident.

It’s important to note that each insurance policy may work differently, from the incidents that are covered to the process for filing a claim, you’ll want to read the fine print carefully to know exactly what’s covered.

What does cell phone insurance cover?

As we mentioned, what is covered by your cell phone insurance policy depends on your provider. However, there are a handful of incidents that are likely to be covered by most policies, including:

• Loss and theft.
• Water damage.
• Accidental damage.
• Broken or cracked screen.
• Mechanical failure after a warranty ends.
• Power surges.
• Natural disasters.

Depending on your policy, your cell phone insurance may also cover accessories, including earbuds and chargers.

What does it not cover?

First, many insurance policies won’t cover natural wear and tear that happens over time.

Your cell phone insurance policy also isn’t likely to cover you if you’ve made changes to your phone. For example, after-market modifications or DIY repairs may disqualify you from coverage, even if the damage is unrelated.

Finally, cell phone insurance generally doesn’t cover anything that is covered by the manufacturer’s warranty, including covered damages within the warranty period, cosmetic flaws, or device or accessory defects.

How much does it cost to replace an insured phone?

Most cell phone insurance policies require a deductible, meaning if you file a claim, you’ll have to pay for some of the cost out of pocket.

The size of your deductible will depend on your insurer and the policy you choose, but they tend to range from $50 to $200. Policies can also have different deductibles for different types of damages. Like car insurance, your deductible usually applies per claim rather than per year, and you may be limited to the number of claims you can file in a year.

How cell phone insurance can save you money

Cell phone insurance can save you money by reducing your out-of-pocket costs if something happens to your phone. Depending on the model, it could cost upwards of $1,000 to replace if you lose it or it breaks. With a cell phone insurance policy, you would only be on the hook for your deductible.

Suppose you had a phone worth $1,000 and an insurance policy with a deductible of $100.

You’re giving your toddler a bath when the phone rings and you have to grab it because it’s the roofer you’ve been trying to reach for days and you have a leak that desperately needs fixing but, oops, the device accidentally slips out of your soapy hands and into the tub, to the delight of your child who now has a new bath toy and to your utter and shocked despair.

So you file a claim with your insurance company and get your new phone for just $100. Pretty nifty and thrifty. Though your child will lose her new toy, since the company’s likely to ask you to send in the old device.

In addition to fully replacing your phone, cell phone insurance can also cover the cost of repairs or replacing a single part, such as the screen.

“Let’s say you accidentally drop your cell phone and crack the screen,” Hawrylack said. “If you have insurance, you would only have to pay your deductible to have the phone repaired or replaced. Without insurance, you would have to pay the full cost of the repairs or replacement yourself.”

How much does cell phone insurance cost?

The cost of cell phone insurance depends on several factors, including your insurance carrier, the type of phone you have, your deductible and more.

If you have an iPhone or Galaxy, you can purchase your cell phone insurance directly through Apple (AppleCare) or Samsung (Samsung Care+). The prices start at $3.99 per month and there are number of plans and payment options depending on your model.

You can also buy your insurance through your cell phone carrier, such as Verizon, AT&T or T-Mobile. The cost of these plans generally depends on the type of phone you have, your cell phone plan, the number of people and phones covered, and more.

Finally, you can buy cell phone insurance through a traditional insurance company, either as a standalone policy or as a part of your homeowners insurance or renters insurance policy.

Is cell phone insurance worth it?

Cell phone insurance can be an excellent investment. Phones today are as expensive as many computers, yet easier to break.

The average cost of a cell phone is around $550, and it’s not uncommon to find phones that cost well over $1,000. Yet, according to the Federal Reserve, most adults wouldn’t be equipped to handle a financial emergency of just $400.

Unfortunately, that means someone with a broken cell phone would have just three options: use money allocated for other bills to buy a new phone; go without a cell phone; or buy a new phone and carry the cost on a credit card. For better or worse, phones are now indispensable for many of us, making cell phone insurance a pretty good idea.

On the other hand, if you can afford to replace your phone without financial strain and take relatively good care of your phone, you might feel comfortable going without insurance.

“If you are prone to losing or damaging your phone, or if you simply want peace of mind, it may be worth the investment,” Hawrylack says. “However, if you are careful with your phone and don’t mind paying for repairs or replacements out of pocket, you may not need it.”

Considerations when pondering cell phone insurance

Are you still on the fence about buying cell phone insurance? Here are a few questions that can help you decide if it’s right for you:

• Am I prone to breaking or losing my cell phone?
• Can I afford to replace my cell phone in cash and still have money for my other expenses?
• Would I be okay with a cheaper or used phone if I broke mine and couldn’t afford a new one?
• Does my insurance policy provide all of the damage coverage I expect to need?
• Between the monthly premium and the deductible, is my insurance policy cost-effective if I have to file a claim?
• Is my cell phone already covered elsewhere, such as under my homeowners insurance policy or through a credit card protection plan?