I have been helping a friend switch from Sprint to AT&T because I’m a huge fan of AT&T and it would reduce the cost of their plan considerably. It came down to a decision of whether to opt in for the $5 per month Wireless Phone Insurance. For the peace and mind, $5 a month doesn’t sound like much, but when we take a closer look at the numbers, things become a little clearer.
Phone Insurance is Expensive
At $5 a month, that comes out to about $60 a year for phone insurance. For five lines, that’s $300 a year. Even if you lost or broke two phones in one year, $300 could buy you two nice phones.
So it comes out about even IF you somehow lose or break 40% of your phones. If something happens to a third phone, you may come out behind, and if you lose fewer than 2 phones, you probably come out ahead. Do you think you would lose or break 2 out of 5 phones in a single year? More?
Regardless of that decision, there’s another kicker: If you have insurance and something happens to your phone, each replacement phone is subject to a $50 or $125 non-refundable deductible per approved claim depending on the phone model. Under our previous assumption, the cost of losing two phones becomes somewhere between $400 and $550 to replace the phones. WOW, that makes the decision pretty definitive: phone insurance just isn’t worth it. Why not roll the dice, knowing that if you get your phone lost or stolen, you can just buy a new one with the money you save.
You Are Already Protected
Still not convinced? Listen to this: All phones come with a manufacturer’s 12 month warranty. If your phone isn’t working properly (does not include lost or stolen phones, or phones with water damage), just call AT&T and they’ll ship you a new phone for free. If you’re responsible, chances are it’s better off going without the insurance and trusting yourself.
After the first 14-21 months, depending on your plan, you are eligible for an upgrade at a reduced cost. If your phones are still functioning after this period of time, save them! If for some reason, your phone doesn’t function, this can be your backup until you become eligible for another upgrade.
While it may be a gamble to pass on the phone insurance, it seems like a small one to me. What do you think?