Don't Buy Cell Phone Insurance Without Reading This

Let's face it - things break down. Brake lines, plumbing, computers, kitchen sinks and the occasional guitar string need to be repaired and or replaced from time to time. With anything you buy, there is a period of time that you can expect it to last. With cell phones, that period is typically about two years - with ever increasing technology and the consumer's insatiable desire to continuously improve upon it, there is no sense in designing a phone that will survive into the next millennia. Phone manufacturers simply wouldn't be turning as great a profit as they are if they weren't selling so many units.

It's a cycle that feeds on itself. The first step is to get the public addicted to using the service, through one of the major carriers: AT&T, Verizon, Sprint and US Cellular. This is done by having the carrier take a massive initial loss on the phone to put it in the customer's hand. It shouldn't come as a surprise that a phone isn't free, yet it consistently amazes me the attitude and expectation of the customer that they shouldn't have to pay for it. The carrier will make up the loss, and a lot more, by forcing the customer into the servitude of a one to two year contract. This is why phone contracts exist: the ignorance of the general public of what a phone is actually worth.

Once addicted, the fragility of the technology takes over. Couple that with general apathy and a lack of concern towards one's possessions, and cell phones start breaking. A lot. This is why carriers offer insurance - a customer is now indentured to the service provider, required to pay for a service that they cannot use because they threw their phone into a glass of tea (I've seen that one). Up front, the insurance looks like a good deal, however I encourage anyone reading this to do the simple math, and please become aware of a critical fact: the replacement phone that you will get is NOT a new one.

Yep. But don't just take my word for it, and definitely don't ask the sales rep in the store about it either, as it's their job to 'sell'. They will advocate heavily for your buying the insurance, as they stand to make a profit from it, and as such their opinion is a biased one. Ask the person on the phone you will be placing the order with for the new unit, and if they hesitate to give you an answer, force them to. They are required to tell you if it is a 'new' or 'reconditioned' unit, which it will of course be the latter.

Carriers are now requiring you to make your decision on adding insurance the moment you go under contract. When making your decision, add up the monthly rate you pay for the insurance, multiply it by the number of months in your contract, and add in the cost of the deductible that you will have to pay if you replace your phone. You will find that the total summary cost is VERY close, as in about 90%, of what you would pay if you bought a NEW phone outright. And the one they will give you is used, and probably untested (and still broken). Add the fact that if you file two claims, the insurance carrier will drop you. Buying insurance negates the cost of what you saved on the phone when you started, causing your savings to bleed out slowly each month.

I'll bet you are wondering what happens to your old phone when you ship it back to the insurance carrier. This is where.

In 2006, a woman approached me with a brand new replacement phone she just received from insurance, concerned because she didn't know how to activate it. I cut open the still sealed box, removed the 'factory plastic' from the shiny new faceplate, slid in her sim card, popped in the battery, turned it on and read the message on screen.

"Insert SIM"