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Smartphone Insurance: Really Important or Waste of Money?

Many protect their phones with smartphone insurance. But, do you really need to have it insured in order to keep it protected? Maybe or maybe not? Let's find out. 

The cost of smart phones continues to rise. Apple set the bar back in 2017 with the announcement of the iPhone 10 at a cost of $1,000, which helps us pose the following question...Smartphone insurance: really important or waste of money? If I had a dollar for every person who said they couldn’t save an emergency fund, yet they owned an iPhone 10, I'd be one rich man.  Believe me. Some of us depend on our phones — especially business owners. So, it is important to protect it. But, we can protect ourselves while also protecting our wallet. Here are some important points to consider when making a plan to protect your phone.

Tool or Toy?

Sit back and be honest with yourself. Is this really something you need or is it a non-essential? If using a flip-phone instead of a smartphone is what is needed to keep you on track with your financial goals, are you willing to do it?  It is very easy to convince ourselves something is a need when, deep down, it is really a want. 

Coverage Terms

Are you aware of what your smartphone insurance actually covers? Most cover water damage, accidental physical damage, loss and theft. When an incident occurs, you file a claim, like any other type of insurance, in order to have your phone replaced.  That can sound like a great deal when paying just $10 - $13 a month — especially for a phone that may be worth hundreds of dollars; but, there is one thing you might be forgetting. The big D-word! DEDUCTIBLE!!! Every time you have a claim, you will need to pay a deductible of up to $199 to replace your phone. That can greatly effect your out-of-pocket cost and make the smartphone insurance not really worth it.  We'll break this down below.

Water Resistance

Is your cell phone already protected from the elements — especially one of the worst possible —liquids? If you have anything newer than an iPhone 7, your phone is actually able to be submerged in three feet of water for thirty minutes. This is because of its IP67 rating against water and dust.  So, if you drop it in the toilet, bathtub or pool and get it out quickly, you are most likely safe. However, that may not be the case if you leave it in your pocket and your pants make it into the washing machine.  So, check the particular water resistance of your smartphone. And, if you want to use it in the shower….Well, that’s probably not a smart idea. 

Other Insurance

Do you already have coverage in case of theft or loss? You likely do through the personal property portion of your renter's or homeowner’s policy. The deductible is also probably close to or about the same amount as smartphone insurance coverage. Check with your independent insurance broker or policy about what your insurance covers in this area.  Years ago, my wife left her smartphone in the bathroom at work and when she went back just two minutes later, it was already gone. Our renter's insurance replaced it and all we paid was the deductible.  Later, a similar situation happened with a family iPad in a park and we were able to replace the iPad in the same way.  So, given all this information, here is what I recommend.  

If You Have $1,000+ In Savings, Cancel Cell Phone Insurance

If you don’t know what I am talking about when I say $1000, check out my previous Savvy Saturday video, “The Essentials of an Emergency Fund.”  Stop paying for smartphone insurance. Here’s why.  Say you bought a new iPhone for $1,000, pay $13 a month for insurance and have a deductible of $199. Well, the average person keeps their iPhone for two years. So, over those twenty-four months, you are going to pay $312 in smartphone insurance.  Let’s just say that sometime, within those two years, you file a claim just once. Over those two years, you ended up forking over $511 in insurance and deductible costs. The phone costs $1,000 to replace and you just paid $511 to insure the difference of that phone, which is only $489.  So, you are paying over 50% of the original value of the phone to insure something just once that is now, most likely, worth less than $1,000 all while having $1,000 or more in the bank. The point is... 

Stop wasting money on smartphone insurance. You're self insured in this situation.

Get a reliable case, like an OtterBox, stay away from liquid exposure greater than the resistance rate of your phone, and depend on your renter’s or homeowner’s insurance for issues with loss or theft.

Instead, go do something else with all that money!

When you factor in that a new smartphone gets released almost every year, the value of your phone drops and the amount you are insuring becomes less and less.  A year after that phone is released, it is likely only worth about $900. Two years later and the phone is likely only worth about $800. This is a pretty predictable market pattern for the iPhone if not most other smartphones as well.  Also, another aspect to consider is when you file an insurance claim and receive a replacement phone. Well, that phone is often refurbished or reconditioned.  My math example above is based on new retail cost.  Lastly, if you go with an even less expensive replacement, the gap is even smaller for what you are ensuring against.  For example...

If you purchased a phone with a value of $800, factoring in $13 a month for insurance and including a slightly lower deductible of $149. Over two years, that equates to a total of $461 for an $800 phone which results in you insuring a value of only $339.  Stop the insanity! Protect your phone while protecting your wallet so you can not only keep what's important safe but find more money to fund your dreams.

Question: Do you have smartphone insurance? Have you ever had to use it and fork over a nice chunk of change for a replacement? Well, it's never too late to correct the situation, Let me help. Contact me today!

Come join my FREE Facebook community, The “Strong Together Money Community.” to stay informed and encouraged on your financial journey. Also, feel free to check out my free e-book to help you save in five additional areas. 


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