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Phone Insurance – Why Bother?

When you first buy your mobile phone (cell phone) you probably got pushed to buy the add-on insurance – or maybe you got given a few months free insurance together with the phone.

This free add-on is a clever and very profitable technique which phone dealers use to get you inadvertently into subscribing to the (cell phone) mobile phone insurance iteself. When you get the phone and the free phone insurance you are automatically set up to pay by Direct Debit for the insurance at the end of the free period.

But the question is this:

Are you positive you need phone insurance?

To answer that you need to answer 2 specific questions – the answer to which varies from person to person.

1. Do you want to cover the cost of replacing your phone?
2. Are you worried about being without your phone for an extended period of time?

If your phone is Pay As You Go then you will be acutely aware of how much a decent phone costs because that is what you paid when you bought it.

In fact, pay as you go phones are not actually the real cost of the phones because mobile phone operators slightly subsidise the cost of the handset. This is because these phones are usually locked to only work on their network, so they make up for the loss on the cost of the phone calls.

But they are not discounted by much (relative to the discount given to Pay Monthly contract customers) because they can be unlocked to use on other networks. However, most people do not do this – so the network knows they will get that customer’s calling minutes and business.

If you are a Pay Monthly contract customer, chances are that you did not pay anywhere near the real cost of the phone – they get heavily discounted. You’ll get a discount because you are promising to pay the network over the next 12 months or more.

While your phone might have been free when you got it on contract, it is going to be far more expensive to replace.

Normally you would find the quickest way to get a new phone is to buy a pay as you go one. So that is your replacement cost.

As a contract customer this wil be considerably more than you thought it would be. For example the Apple iPhone is around £300 or US$400 to replace. That will hurt your wallet if you have lost it, or damaged it or some idiot has stolen it – for that you wowuld most likely want specialist iPhone insurance.

So how are you going to pay for it?

That is what mobile phone insurance is for. But is it worth it?

Unfortunately there have been many insurance operators who have fleeced the customer and charged high prices for an insurance policy that just did not make economic sense. For example, a lot of the insurance policies given free at point of sale turn out to be overpriced after the initial free period eg 8 or 10 a month.

Now if your phone is top of the range and expensive to replace, this might make sense, but not if you have a basic ‘I just want to make and receive calls’ type mobile phone.

So the insurance needs to be tailored to what phone handset you have.

If you have a cheaper phone, then it will be cheaper to replace, therefore the phone insurance should be cheaper. A more expensive phone should have a more expensive mobile phone insurance policy.

So that is a key decider in who you choose to insure your phone; can they tailor or offer a policy for your specific phone handset?

While you are looking at the financial side of covering the cost of replacement, you also want to consider whether the phone insurance company insist on a long term contract; many do, some do not.

If you must sign a 12 month contract (standard with many) then the cost of the insurance is a straight forward calculation of 12 months multiplied by the monthly cost. If this amount is bigger than the cost of replacing the phone yourself (by purchasing a Pay As You Go handset) then the insurance is not worth buying.

If there is not a 12 month contract then you are free to do as you choose.

If you are a Pay Monthly contract customer then there is another consideration. You will be free after your contract expires to then go and either upgrade or sign up to a new network and get a new free mobile phone.

So towards the end of your phone contract the mobile phone insurance has less and less value and worth to you as a customer because you are at less risk of having to pay out a big bill to replace the phone.

N.B. – After you sign a new phone contract you are going to be exposed to the whole cost of replacing your phone. You would have to pay the full price to replace your mobile phone if it was lost, stolen or damaged, so you are more likely to want to have mobile phone insurance.

Often, people say they can get their phone insurance via their home and contents insurance – but if you make a claim for a (relatively small) phone cost, what is going to happen to your no-claims bonus and your home insurance premium cost next year?

So getting mobile phone insurance is about sensibly minimising the risk of having a big replacement bill, without spending hugely on the monthly insurance policy.

The best way to achieve this is to use an insurance provider who does not have a 12 month contract and who has the right price insurance policy for your phone (not a ‘one price fits all’ policy)

Read part 2 of this article answering the “Are you worried about being without your phone for an extended period of time?” part here – coming soon…

When you buy mobile phone insurance you need to make sure that certain vital elements are included and covered. So what are the 3 absolute must-have essentials…

Mobile phone loss:

1.Every year over six million mobiles are lost…

Why more? Because many insurance policies do not cover loss, so often people with those policies commit insurance fraud by claiming the phone was stolen in order to get a new phone from their insurance company. This is why phone crim figures are as high as they are - because more crime is reported artifically and less phone theft.

Mobile phone accidental damage is not covered by a number of insurance policies. There are some providers who do include it in their plans, but many don’t. So dont avoid this.

If you drop your phone accidentally, and the screen is shattered, it is not covered by the manufacturers waranty. The warranty is what covers you for things just stopping working - not damage.

So you need to make sure that with your mobile phone insurance you are covered for accidental damage especially if you are one of the 1000’s of people who do not carry their phone around in a leather case to protect it. One tumble from your pocket or bag, down to the ground can be enough to shatter the LCD display screen.

Leather cases are a good option. Sure it makes it a bit bulky but it protects very effectively. You'll find them at your local shop.

Your mobile phone will take a beating through normal everyday use. It happens, its life. But you don’t need to have to pay for it when it happens. With the right mobile phone insurance (that is not expensive), you can effectively protect against accidental damage.

-> Water Damage

Water is a BIG killer of phones - far more than you might think.

Ove 1.2 MILLION phones are killed by water every year – whether down the toilet, in a beer, in a puddle, in a lake… The list of possibilities goes on and on.

And the annoying thing is that there are many phone insurance policies that specifically exclude (ie do not cover) water damage. Water damage is going to be an essential part of your phone insurance.

Mobile Phone Crime

1.3 MILLION mobile phones are stolen every year according to extensive research by Continental Research. According to Halifax research this figure is over 2 MILLION.

£390,000,000 - that is thhe annual cost of phone theft

* One mobile phone stolen every 12 seconds

* Over 2 million mobile phones are stolen every year

So you need cover against:

1. Loss
2. Accidental damage – including water damage
3. Theft

So make sure you get your self covered with all these vital elements within your mobile phone insurance

Gadgets surround us. They are indeed everywhere to be seen. We use them for so many things it is hard to think what we would actually do without them and just how would we cope in getting by. I would argue the most important gadget we use today is the trusty mobile phone. Without it many of feel like we are missing a limb and we are heavily dependent upon it for much of our daily lives.

Mobile phones are heavily, mass produced now and this has led to the cost of them falling significantly of late. Many of the high street retailers sell their mobile phones for small sums of money, but these phones are often lacking in the lasts technology. Despite the fall in cost, a top of the range phone will still cost many hundreds of dollars.

IF you bought a top of the range mobile phone, would you also buy a protective case for it? I would suggest that nine times out of ten the answer to this would be yes. But what other protection would you get? Were you aware that you can buy specialist insurance for mobile phones and indeed, many other gadgets that there are out there?

gadget cover is available online from a number of different providers. It enables you to have the cover in place for any number of your expensive gadgets. With gadget insurance you would need to think about what type of risk you would need to insure your gadget against and maybe consider what kinds of risk your laptop, camera, phone or any number of gadgets may face once you have purchased it.

The insurance would protect you for a number of different risk that your gadgets face and a common risk is that of accidental damage, so when you look for a suitable insurance coverage, you need to ensure that accidental damage comes as standard with your policy. Many insurance providers would not offer accidental damage as this is such a high risk of occurrence.

With insurance in place for your gadgets you then have the safety net of having your expensive gadgets covered for most risks that could occur. Cases for phones and laptops so offer some form of protection, but if you have an additional policy then if you do damage your phone or gadget, you will then be paid the cost of the phone or gadget back. This would then enable you to replace your phone with a new one.

Clearly, gadget insurance is good to protect your expensive gadgets, but you should still try and keep your mobile phone or laptop or indeed any other gadget safe from harm by following basic safety measures accordingly.