Cell-Phone Insurance: A Bet on Bad Luck?

When my three-month-old iPhone 3G nearly died, I suddenly became very interested in phone insurance plans that had previously left me cold. Major carriers typically offer insurance along with umpteen other "up-sells" when you buy a new handset, and I reflexively turn all of them down.

But faced, even temporarily, with the prospect of having to replace my iPhone at its full, unsubsidized price ($500 for the 16GB model), I began to wonder if insurance might not be worthwhile. It turns out that one company--Asurion--manages insurance programs for all the major U.S. carriers. However...

No iPhone Insurance

The first thing Asurion chief marketing officer Andrew Cole told me was that no insurance program exists for the iPhone 3G; Apple offers only AppleCare, which for $69 extends for a second year the free tech support you get with the phone.

"We'd be happy to cover [the iPhone]," Cole says, explaining that the problem is a lack of replacement units. Apple, apparently, is either selling all the phones it makes to new owners, or using them to meet its own warranty obligations.

But all other makers sell replacement units to Asurion. "Literally thousands and thousands [of phones] are covered, except for the iPhone," Cole says.

Asurion's policies vary in price ($5 to $8 a month) and in details from carrier to carrier, but basically the company will replace a lost, missing, or malfunctioning out-of-warranty phone with an identical or similar model--once you pay a deductible. You can place a claim on Asurion's site or call the company's toll-free number; when a claim is accepted, Asurion will send a replacement phone overnight.

While most (about 60 percent, according to Cole) of the replacement phones are brand-new, Asurion reserves the right to provide a refurbished unit that the company says has undergone extensive quality checks and comes with a one-year warranty.

Deductible fees also vary, depending on carrier and/or model. Verizon Wireless, for example, charges a $50 deductible for all handsets; other carriers have a range of deductibles--up to $130 for high-end models. An inexpensive phone may not be worth insuring, but if your unit is a high-end smart phone that would cost $300 or more to replace, insurance might be a good idea.

Options May Increase Appeal

New developments could make phone insurance more attractive. Some carriers offer an early-upgrade option in which you pay a modest surcharge to receive a newer model of phone when you submit a claim. You'd get a new phone without paying full cost--or committing to another two-year contract to secure the subsidized price.

Also, a data backup service for phones will maintain copies of all your contacts, calendars, music, and other datebook files, so that if you lose your handset, Asurion will send you a new one with all your data already preloaded. This is an extra-cost option from some carriers, but Cole believes that it will eventually be part of the basic insurance offering.

Some 60 million phones are lost or damaged every year in the United States alone, Cole says. If you can't be without a cell phone and don't want to deal with replacement hassles, cell phone insurance might help your peace of mind.

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