Smartphone insurance can be a smart move

Suzanne Choney • E-mail

I was finalizing the paperwork on the purchase of a smartphone when the insurance question came from the sales rep: "Do you want it?" he asked. The phone store was busy, I was more than ready to get out of there, and was on the verge of saying "yes," when I asked "How much is it?" "How much time do I have to decide whether I get it?" and "If something happens to this one, will I get a new phone to replace it?"

The answers: $7.99 a month, 15 days and maybe. Oh, and there's a deductible on the phone, the sales rep said. It's $89. Oh, he added, you have 30 days to decide, not 15. How do I know if I will get a new phone or not if this one needs replacing, I asked? You won't, he said; that will be up to the insurer at that time.

Buying a cell phone can sometimes can be as stressful as buying a car, and the matter of insurance is often thrown in as a last consideration in the process. With smartphones such as iPhones, BlackBerrys and Palm Pres increasingly popular, it makes sense to consider insurance, which can range from about $5 to $8 a month for what the carriers call "advanced" devices.

"It may well be worth it to spend the money for a phone that costs between $200 and $500," said Sue Macomber, telecom specialist for the Utility Consumers' Action Network, a nonprofit organization based in San Diego.

But it's important to know there are more options than the one offered by your wireless carrier. (In the iPhone's case, there is no insurance offered by exclusive carrier AT&T; more on that in a moment.)

Asurion is the company that administers cell phone insurance for several wireless carriers, including Verizon Wireless, AT&T, Sprint and T-Mobile. Even so, monthly insurance and deductible costs vary by carrier and by phone.

For example, T-Mobile says there is a $130 deductible on the new myTouch 3G Google phone ($200 with a two-year contract, but $500 retail) and a $90 deductible on the new BlackBerry Curve 8520 ($130 with a two-year contract, but $300 retail). Sprint says phones like the BlackBerry Tour, Palm Pre and Samsung Instinct have $100 deductibles.

Other choices
But there are other companies like Safeware, SquareTrade and Best Buy that offer insurance and warranty policies independently, and some home and auto insurance companies let customers add smartphones via a personal articles policy.

Even though a class-action lawsuit settled in 2007 made disclosure about cell phone insurance details — such as deductibles and refurbished phones — clearer, it's still tricky ground to navigate. Some phone sales reps are better than others about knowing — and sharing — those details.

"It's better to search your insurance options first, read the terms and conditions of the insurance policy through the carrier, then go back and buy your phone with the knowledge of exactly what you're getting, what it's going to cost (to replace) and all the contingencies and related obstacles you'll face if the phone is broken, lost or stolen," said Macomber.

"Most people don't think to ask questions; they just sign the papers" for insurance when they're buying a phone, because they're often worn down by the end of the phone sales process, she said.

And wireless carriers do state the details of insurance coverage, but you have to find them, either on their Web sites or in brochures in retail stores.

There are gems like this: "Effective Nov. 3, 2008 ... each replacement phone is subject to a $50 or $125 non-refundable deductible per approved claim depending on the phone model" (AT&T), or "Asurion may fulfill claims with new or remanufactured equipment. In general, claims are fulfilled with the same make and model you claim. If this is not possible, a like-kind make and model will be substituted. Color, feature and accessory compatibility are not guaranteed." (Verizon Wireless)

For less expensive phones, insurance — which can start at about $5 a month — may not make sense, especially when coupled with a $39 deductible, as is the case for basic flip phones like the Motorola MOTO W755 or the LG VX8360.

Consumer Reports says such insurance is not worthwhile "for most consumers."

"The cost of the premium over a year, for example, would be $50 or $60. Tack on the deductible, and you've paid as much as you would have to buy a new phone," the magazine said in one of its reports.

MORE FROM CELL PHONES

Cell phones Section Front

Smartphone return, exchange policies for the holidays A third of teens say they’ve texted while driving Review: Motorola's Cliq is a social butterfly Unspoken rules govern cell phone etiquette Evolution of the cell phone 8 cool phones you can’t get here ... yet Schwarzenegger to Shriver: Put down the phone ‘Open’ for business: Android phones Mobile banking on the rise during recession Vonage releases app for iPhone, BlackBerry Cell phones Section Front   Add Cell phones headlines to your news reader: