How mobile phone insurance plans work - and whether they are worth paying for

Mobile phones have increasingly become a vital part of our lives.

From managing our appointments, accessing social media and the latest news, to taking photographs and keeping in touch with our friends and family, we are now reliant on them than ever before.

However, as manufacturers come up with phones with increasingly impressive functionality, phones prices have also been creeping up, which means phones need to last us for longer. During that time, a lot can happen to our phones. 

We could drop our phones, spill liquids on it, accidentally sit on it, or accidentally leave it behind somewhere.

Mobile phone insurance comes in as a possible solution to mitigate the cost of replacement if you are to lose or break your phone. 

But is this a great deal? What are some considerations you need to think about before signing up?

Let's examine these questions in this article.

How do mobile phone insurance plans work?

While phone manufacturers provide warranty, they are typically limited to manufacturing defects for a duration of anywhere between three months and a year.

This is where mobile phone insurance plans can come in to protect your phone even after your warranty expires, and for more insured events beyond defects, such as accidental damage, or if your phone gets stolen or lost.

Depending on the insurance provider, monthly premiums can range anywhere between $9 and $15, which works out to anywhere between $108 and $180 a year, depending on the level of protection you need.

Things to consider when signing up an insurance plan

With a myriad of mobile phone insurance on the market, the fine print and scope of coverage differs from each insurance provider. Here are some common aspects you should take note of:

1. Scope of coverage

As mentioned earlier, every insurance provider will provide different scope of coverage.

Most of the insurance on the market covers accidental damage or water/liquid damage, while a few selected plans will cover loss and theft, as well as unauthorised use of airtime and fraudulent transactions made using the phone at a higher premium.

2. Deductibles for claims 

A majority of insurance plans require the owner to pay a deductible upfront if they make a claim.

The deductible can run from a range of $100 to $150 per event, depending on the number of claims made, the level of protection you choose for your phone, as well as the model and age of your phone.

ALSO READ: 4 home insurance mistakes that will cost you

3. Limited number of claims

In addition to deductibles, there are some plans that limit the number of claims in a year.

For instance, some insurance plans offer one event for claim for damages/repairs, while some may offer up to two claims per year for damages, and a single claim for theft or loss for phone.

4. Replacement phones

Some insurance policy will provide customers with a replacement phone, either in lieu of a repair should a phone be damaged, or if it gets misplaced due to theft or loss.

However, it is important to note that the phones that are given to you may be a refurbished phone instead of a new set, and the colour may not be same as the one you purchased.

In addition, some insurers will include a provision where they will replace a phone of a same value instead of the same model.

Is it worth to buy a mobile phone insurance?

Accidents can happen with any item that is getting frequently used.

But since a mobile phone insurance does not cover everything you would have thought, it might be a good reason to pause before committing to it.

[[nid:440354]]

It is also important to note that such insurance should not be used as an excuse not to take care of your phone.

Even with insurance, making a claim for damage or loss comes with deductibles you will need to pay, and the hassle of needing to spend a period of time without a phone.

Therefore, you should look at how you can protect your phone, just like you would do for any of your personal property.

Another alternative to such insurance is to pay yourself the monthly insurance cost by creating a "phone emergency fund", in case you need to replace your phone.

This may not cover the entire expense of the replacement, but it will certainly help in paying off any ad-hoc cost, should you need to send your phone for repair or get a replacement phone (either used or a cheaper model) to make it through your two-year contract.

However, if you are still keen to purchase an insurance for your phone, there are some questions you may ask to help you narrow down your decision:

• Have you dropped your phone once since getting a new device? Or misplaced it elsewhere?
• Are you working in a harsh environment (for example technical line), or lead an active lifestyle where your phone will be prone to damage from the elements?
• Lastly, are you a frequent traveller for work?

If your answers to these questions are "yes", signing up for coverage might work for you.

Mobile phone insurance isn't a license to be reckless or careless

To conclude, a mobile phone insurance is like any other insurance out there: you pay for it, but you hope you will ever not use it.

However, it shouldn't be a license to be careless or reckless with your mobile devices.

Also, know what you are buying by reading the fine print and check the terms and conditions and the scope of coverage, so that you will reduce the chances of resentment with your decision to purchase the insurance in the first place.

This article was first published in Dollars and Sense.