Do you really need cell phone insurance?

Herb Weisbaum • Profile • E-mail

You’ve finally settled on the perfect new cell phone with all the latest features. You’ve chosen the accessories and picked a service plan.  Now the salesperson asks if you want to buy insurance to protect your purchase.

It’s only $4.99 a month and you’ll be covered if the phone is lost, drops in the toilet or is run over by a car. So you say yes. Did you make the right decision?

Your new phone comes with a manufacturer’s warranty. But that only covers equipment failure caused by a defect or malfunction. You’re out of luck if the phone is lost, stolen, or accidentally damaged.

Dwight Moore with Verizon Wireless, says customers like cell phone insurance because they know if something happens to their phone, they’ll quickly have a replacement. In most cases, he says, it will arrive overnight and will be “exactly the same or similar” to the one you had.

Why consumer groups don’t recommend it
“We think it’s almost always a waste of money,” says Consumer Reports Editor-At-Large Greg Daugherty.

“You can insure every gadget in your life if you want these days,” Daugherty says. “We think all this little insurance is just adding up to too much in many cases. People really ought to be focusing on the big risks.”

San Diego’s Utility Consumers’ Action Network (UCAN) also advises most consumers to skip cell phone insurance. UCAN’s Michael Shames tells me they get “lots of complaints” from people who did buy this coverage.

Some complain their replacement phone is used, what the industry calls “refurbished.” Others are surprised by the deductible, usually around $50.

Shames calls that “one of the dirty little secrets about phone insurance.”

Shames says insurance might make sense for some people — those who are prone to drop their phone, get it wet or somehow disable it. “It might be useful if you happen to work on building skyscrapers and you tend to drop your phone 30 or 40 stories,” he says.

It could also come in handy if you’re buying a high-end PDA phone that would cost you $500 or $600 to replace. Just remember, he says, “your replacement phone is likely used.”

An insurance nightmare
Justin Leavens, a businessman in Sherman Oaks, Calif., is one of those who complained to UCAN.

He purchased insurance coverage when he bought a fairly expensive phone from Verizon Wireless. “My cell phone is my lifeline,” he says. “So I couldn’t really be without it for more than a few days.”

When the phone was damaged, Leavens filed a claim with the insurance company, Asurion, and was told he would have a replacement phone “the next day.” When it didn’t arrive, he called Asurion again and was told they didn’t have his phone in stock. His choices were: get on a waiting list or take a different phone that did not have the same features as the broken one.

Leavens says he suggested comparable phones that would make him happy, but the insurance company would not agree to that. He told them his local Verizon store had his phone. He offered to go pick one up if they would pay for it. Again, they said no.

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