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It’s hard to buy a new phone or enter into a new contract these days at any high street phone shop without the salesman pushing insurance into your package. Many people are programmed to deal with salesmen by answering “NO” to every question they have, even if it is value for money. A lot of people may be swayed regardless and take everything the salesman offers without thinking it over.
Phone insurance typically covers: -
- Accidental damage,
- Liquid damage,
- Unauthorised calls,
- And in some cases covers you outside the UK.
The first thing people worry about is losing the metal price (the full price of the phone) of their phone if it is lost, stolen or damaged; having just spent £400+ on your new gadget it’s not ideal if you drop it down the toilet!
The price for an unlocked iPhone 4S is currently £499 direct from Apple. The iPhone is a good example of a phone that holds its value spectacularly well and for the basis of this example I’ll consider that the value of a brand new iPhone 4S in 3 years time will be the same as an iPhone 3G which ranges between £90-£120. Phone insurance for the iPhone is typically £7.99 a month (not including loss). The graph below shows the relationship between the market price of the iPhone 4S and the cost of insurance:
If you’re no statistic wiz the graph above (all estimated values) basically says that after 26 months of paying for the insurance you will have paid more in insurance than what the phone is actually currently worth. However most people upgrade their phones after 2 years.
Of course if after 2 years you haven’t made a claim then you would have spent nearly £190 that you will never see again. Another option is to simply save £7.99 a month and put that money aside in case something does happen. Should nothing happen then you have a nice cool £190 lump sum waiting for you after 24 months.
Phone insurance does however cover you for more than the metal price of the phone. If your phone is stolen, and the thief makes hundreds of pounds worth of calls, who is liable? Until you actually report your phone stolen or lost you are liable for all calls made, which even in a short amount of time can be racked up considerably. The company that I used for my iPhone example will only cover up to £100 in fraudulent calls and this is typical across most insurance policies, personally I’ve had bills that are bigger than that. Phone companies will sometimes block numbers if they suspect fraudulent use, but according to other articles on the matter it would appear that the thieves would need to make calls costing well over £500 before the phone company will suspect anything.
Unless you actually need to call international numbers on your mobile, you should ask your phone service provider to block all calls to international numbers and even calls to 0900 numbers, this will prevent a would be thief from calling expensive numbers and would need considerable time and effort to hit you with a bill of over £100. Only then will fraudulent calls cover have any value or peace of mind.
One more thing to remember is that insurance companies are not in the business of paying out for every claim. They will investigate thoroughly and refuse to pay whenever possible.
Is insurance worth it? Personally it’s not for me, after 10 years of owning a mobile phone I’ve never had one lost or stolen. They’ve broken down a couple of times, but that’s what the manufacturer’s warranty is for. I’ve saved nearly £1000 from not paying insurance which would buy me and my dog an iPhone 4S with change for chips! However some people seem to lose or have their phone’s stolen regularly which would make the case for having insurance a necessity.
If you feel you do need insurance, always make sure you read what is covered when buying. This is especially important when insuring an iPhone as companies will exclude a lot of what they normally cover as it is a highly desirable phone. Also it may be worth checking out your home insurance policy as you may be already covered or have an option to be covered.