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Cell Phone Insurance - Yea or Nay?

Cell Phone Insurance - Yea or Nay?

January 20, 2022

My cell phone was dying.  It was a race to see if it was going to die quietly or whether it would catch fire and take me with it.  Off to the store.  We lucked out and were helped right away – no wait!  I’d done my homework and knew what I wanted.  Almost everything went as quickly as seems possible when getting a new cell phone.

It seemed we were close to finishing up.  “You want the insurance plan, don’t you?” the salesclerk asks.  “No! No!” my husband and I exclaim, almost in unison.    

What we know is buying insurance and service plans for small purchases doesn’t save money – it’s costly.  There is a reason every time you purchase a phone, a printer, or a computer, the salesclerk asks if you want to buy protection.  And it’s not because they care one hoot about your finances.  It’s very profitable for their employers. 

The average monthly premium for cell phone insurance ranges from $7 to $17 depending on your carrier and phone, according to NerdWallet.  That’s $84 to $204 every year. 

But there’s a catch most consumers don’t know.  These plans also have a deductible you pay before the insurance pays anything.  Depending on your carrier, insurance plan, and device, this deductible may be as low as $25 or as high as $299. 

If, like me, you are among the half of American adults who have never broken or lost a cell phone, phone insurance likely doesn’t make any sense.  But if you are prone to cell phone disasters, unfortunately most of these insurance companies limit you to two claims in a 12-month period and then your coverage may be dropped.

For purchases of $1,000 or less, it probably makes more sense to use your emergency savings to cover any potential losses, rather than purchase protection plans.  Rather than pay an insurance company a monthly premium, put that same amount into your savings monthly to help offset any future out-of-pocket expenses.