Phone insurance, when is it worth it? (No, I’m not selling anything)
My getting temporarily forced onto Asurion got me to thinking about phone insurance. While normally I’m inclined to scream “scam” it got me to thinking about my friends who are on their ninth iPhone in two years.
So I’m going to use every stat I have to see if it’s worth it.
First off, you’re paying for insurance and you’re also paying a deductible – this may be a screen replacement fee, or a service or replacement. So don’t think of the plan as $15 a month, think of it as up to $250 per incident + $15 a month. Now some things are less expensive, like cracked screens, and can quite often be replaced for $100 or so, but we’re looking at the bigger damaged ones.
For my particular phone I believe that’s $19 a month (we’ll be looking at the $15 plans,) and $250 on a $1000 phone (if I have 1 incident).
The previous $1000 phone I can compare this to depreciated in replacement cost $660 over 20 months. This is an average depreciation of $33 a month. Seems reasonable to me.
I’ve never broken a phone in use (other than the EVO 3D I was using as a music player for my 1yo at the time,) my wife has twice in 11 years, Based on my friends I’m going to say the average person breaks 0.3 phones a year. From this page I learn that the average time from purchase to breaking your phone is about 3 months. The average business phone maybe 6 months.
New cell phone repairs can be $500 with most repairs costing about $100 or so.
Sexy amortization schedule
Nothing says you got my interest like a chart of how long until your phone’s worthless. Sadly my chart making abilities are shot today so you’ll have to use imagination.
Month / Replacement cost of phone / Cost of insurance
01 | 1000 | 15
02 | 967 | 30
03 | 934 | 45
04 | 901 | 60
05 | 868 | 75
06 | 835 | 90
07 | 802 | 105
08 | 769 | 120
09 | 736 | 135
10 | 703 | 150
11 | 670 | 165
12 | 637 | 180
13 | 604 | 195
14 | 571 | 210
15 | 538 | 225* At this point repair is technically more expensive than replacing, however you’ve paid $225 in already
16 | 505 | 240
17 | 472 | 255
18 | 439 | 270
19 | 406 | 285
20 | 373 | 300
21 | 340 | 315
22 | 307 | 330
23 | 274 | 345
24 | 241 | 360
At the end of two years a $1000 phone with $33 depreciation a month and a $15 a month protection plan costs $1360. If you have to use the protection once that’s most likely $1610 with the deductible, and $1860 if you use it twice.
Should you get it?
It depends on how much of a klutz you are, what your phone is, and strangely what your carrier is (we’ll talk about that in another article.)
Remember in the end, the insurance companies make money because most people don’t end up using coverage. If you want to save some money get a good case (I am not looking at you Otterbox, no matter what your claims are,) and don’t drink and phone.
Also teach kids the phone is a sacred thing and if they touch it they’ll be forced to eat broccoli.
If you are on lease and think you need it, figure out what the tipping point where replacement cost is reasonable, is and quit at that point.
But remember, phone insurance is a game that in the end only the phone insurance company and your one drunk friend who somehow got 19 replacements generally wins.