Smartphone insurance: Why you shouldn't scoff at the expense

If you’re smart, you’ll consider insuring your brand-new smartphone. Yes, we bristle at the thought of insuring any consumer electronics—the result of too many sales clerks pitching us on extended warranties for TVs, DVD players, and audio systems. But those devices aren’t nearly as vulnerable to damage or theft as our delicate smartphones.

Consider: You probably dropped $200 to $300 on a Samsung Galaxy S4, HTC One, or iPhone 5 after inking a two-year contract. The phones are worth more than that, but carriers subsidize the retail prices to lure new customers.

If you’re klutzy, wild, or just plain unlucky, however, you could tank your cool new phone with one unfortunate encounter with a toilet. Yes, this happens, and when it does, a replacement phone of the same model or caliber could cost you up to $600 to $700. That’s some serious dough.

Check out these numbers: Asurion, which partners with nearly all the major wireless carriers to provide smartphone insurance, estimates that 80 million phones (of all types) will be lost, stolen, or damaged in the U.S. 2013.

Sad stories proving the value of smartphone insurance popped up in our own office. One coworker fell off his bike, and splintered his phone screen. Another suffered a very expensive loss when he jumped in a lake with both an iPhone and iPod in the pockets of his swimsuit.

Rob Cardin, TechHive
Smartphone in danger

Smartphones are small, slippery, and highly portable. We extract them from our pockets countless times a day, so it’s a wonder that more don’t go skittering across concrete sidewalks, or get stolen from café tables. Indeed, in 2012 the Federal Communications Commission reported that between 30 to 40 percent of all robberies in major cities involved cell phones.

Bottom line: If you live life to the fullest—with your phone at your side—insuring it may be a good bet.

A big investment in a tiny package

David Anderson is the director of product at ProtectYourBubble.com, which has been selling online insurance for smartphones and other gadgets in the United States since March 2012, and in the United Kingdom for more than four years.

“People tend to treat their smartphones like their car keys,” Anderson said. “If it was a bundle of $20 bills equivalent to the cost of the phone, I’m sure they’d treat it differently.”

Jessica Hoffman, director of corporate communications for SquareTrade.com, agreed. Her company has been selling warranties for new smartphones and electronics since 1999.

“Our lifestyles are mobile,” Hoffman said. “We’re out on bikes, we’re pushing strollers, we’re texting at supermarkets, your kid is playing a game on your phone, we’re checking in at the airport.”

By the numbers

I took a look at both Protect Your Bubble and SquareTrade, which are two of the largest online companies specializing in insuring or warranting tech gear, including smartphones. Here’s how they stack up:

How online insurance sites stack up on smartphone insurance.

[Note: SquareTrade has different pricing for iPhone warranties.]

It’s important to note that SquareTrade deals in warranties—contracts that govern repair and replacement of an item due to damage from ordinary use or faulty workmanship. Protect Your Bubble, meanwhile, offers insurance, which protects your item from hazards like theft or water damage.

I found both sites fairly easy to use, but the topic is so complicated that I wanted to speak with a human being in both cases to clearly understand their policies.

The phone service for SquareTrade is more pleasant to interact with. Its automated system clearly tells you how long you’ll have to wait to reach a customer rep, and also offers the choice of leaving a number to be called back when it’s your turn.

Protect Your Bubble plays bad music while you’re on hold, and its automated system doesn’t tell you exactly how long you’ll have to wait for a human. The customer service rep also didn’t seem to be as informed when answering my questions.

Shawn DuBravac, chief economist and director of research at the Consumer Electronics Association, follows companies like SquareTrade and Protect Your Bubble. “One of the interesting things these companies do is they let you buy the insurance or warranty after you buy the product,” DuBravac said. “Historically, you bought them at the time you bought the product.”

But do you need the coverage?

“It really comes down to how risk-averse you are,” DuBravac said. “Someone who is very risk-averse may want to pay a premium rather than self-insure.” Note that the term self-insure is a euphemism. It basically means you personally absorb the full cost of a lost or broken smartphone.

Rob Cardin, TechHive
How active are you when using your smartphone?

If you aren’t worried about risk and want to save some money, you could skip insurance and use a protective case for your phone such as those made by OtterBox or Ballistic. The cases, which sell for around $35 to $100 and are a bit bulky, do give your phone extra protection against water, drops, dust, and crushing.

Alternative paths to protection

There are many other ways to get smartphone coverage besides the online providers.

You can check your homeowner’s or renter’s insurance to see if your policy covers your phone if it’s lost or damaged. You also can buy insurance from the carrier you got the phone from.

It’s also possible that your credit card provider or bank offers a warranty or insurance for your mobile devices. Additionally, iOS device owners are eligible for AppleCare.

And don’t throw away or give away the phone you used before you bought the sexy new model. You may need to activate the older phone to get by until a replacement arrives, or to use until your contract is up and you can buy a new, subsidized phone.

No matter where you’re getting your coverage, the subject is extremely complicated. Make sure you ask lots of questions. Here are some to consider:

  • How soon after I buy my phone must I buy the coverage?
  • If I need a new phone, will it be of the same quality as the one I lost or will it be a refurbished model?
  • How fast will the replacement arrive, and how long does your insurance process take?
  • How many times may I make a claim?
  • What does the warranty provided by my phone’s maker cover?

And be sure to ask yourself these questions:

  • Can you afford to pay the full retail price of a replacement phone?
  • Is your phone vital to your work?

“Remember, if you break or lose your smartphone, you’re not just paying another $200,” said the CEA’s DuBravac. “That changes the math. Consumers have to ask themselves: “Am I willing to self-insure, or do I want other people to insure it for me?”

For comprehensive coverage of the Android ecosystem, visit Greenbot.com.

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