Have Butterfingers? How to Tell If Smartphone Insurance Is Worth It

Image: A smartphone with a cracked screen lays on the ground
A smartphone with a cracked screen lays on the ground after a drop test from the DropBot, a robot used to measure the resilience of phones to dropping, in San Francisco on Aug. 26.Ben Margot / AP

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By Landon Dowdy, CNBC

It's a millennial's most prized possession. Yet, they are also the most irresponsible compared to other generations when it comes to caring for their smartphone, according to a survey by insurance company Protect Your Bubble.

The president of the Financial Planning Association, Ed Gjertsen II, said consumers, in general, are careless about how they treat such a valuable device and, as is the case with his own teenage children, "they throw it in their backpacks and all over the place."

A whopping 90 percent of millennials even take their phones in the bathroom with them, according to Protect Your Bubble's survey. The "liquid drop" — or the phone falling in the toilet — is one of the most common ways phones get damaged, according to online warranty company SquareTrade, along with the standard hand drop where the device simply slips from their grasp.

Thankfully, phones are progressively getting more durable. The website iFixit reports that the Apple iPhone 6S and 6S Plus sport a combination of new technology that makes them far more resistant to liquid damage than previous-generation iPhones. CNBC tested the 6S out and after multiple drops in the toilet, the phone continued to work properly. That's not to say there wasn't any internal damage, but on the surface, the phone was functional. That raises the question — do you need phone insurance?

A smartphone with a cracked screen lays on the ground after a drop test from the DropBot, a robot used to measure the resilience of phones to dropping, in San Francisco on Aug. 26.Ben Margot / AP

Like any type of investment, it's about your risk tolerance. If you damaged your phone tomorrow could you go out and buy a new one — even at full price?

With a two-year contract the iPhone 6S 16 GB costs $199, but if you damage or lose your phone before the two years is up you must pay the full $650 for a replacement.

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"That is what a lot of people miss at times," Gjertsen said. If you're good with the cost, then you are more than likely good without insurance.

But if you are a habitual phone breaker and don't want to cough up $650, it's probably a good idea to cover yourself. If you don't fall into either camp or just aren't sure, here are some things to consider:

"I think the case for insurance is threefold: to protect your investment, protect against Murphy's Law and also to help you stay connected to your world if something does happen," explained Matthew Pufall, product director at Protect Your Bubble.

If you are thinking about getting your phone insured, "the details are incredibly important because what you are paying for and what you think you might be covered for could be two totally different things," warns Gjertsen. For example, under most insurance plans, you're covered if you totally destroy your phone, but if your screen cracks, that's out of pocket.

When it comes to insurance, there are two basic options:

Your carrier

You could get phone insurance through your phone carrier, but plans vary with each provider. For AT&T, insurance is $6.99 a month and offers coverage for loss, theft, accidental damage or out-of-warranty malfunction of your phone. It will provide you with a replacement as soon as the next day and you can make two claims within a 12-month period for a total of $1,500.

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Verizon offers coverage if your device is lost, stolen, damaged (including liquid damage) or defective after the manufacturer warranty expires for $9 a month. You can file two claims within any consecutive 12 months with a maximum value of $400 to $1,500, depending on the device.

For $9 to $13 a month, Sprint offers coverage against loss, theft, and liquid or physical damage with the ability to file three claims within 12 months for a total of $1,500.

T-Mobille's JUMP! provides coverage against accidental damage, malfunction due to mechanical breakdown, loss or theft for $10 a month. T-Mobile allows you to make two claims each year with a limit of $1,500 for each loss.

Outside provider

Using an outside provider is another option to insure your phone. Protect Your Bubble, for example, offers coverage for $5.99 a month in case of mechanical breakdowns, water and liquid damage and even cracked screens. There is no limit on number of claims and if an exact replacement is not available, the company will issue a check for the replacement value, minus the deductible.

SquareTrade insures for mechanical and electrical failures and accidental damage but not theft or loss. You can purchase coverage for $4 a month for a three-year plan up to $8 for a month-to-month plan.

You could also insure your phone under your existing homeowners insurance as a valuable personal article for up to $50 a month. However, most home insurance policies have a $1,000 deductible, more than the cost if you went and purchased a new phone.

Buying phone insurance could give you that extra peace of mind knowing that if you drop it, you are covered — just be sure to read the fine print to know what you are covered for and for how much. Paying $12 a month for insurance, not including the cost of a deductible (usually around $150), will quickly start to creep up to the cost of buying a new smartphone.

At the end of the day, it depends on your level of risk tolerance — and tendency toward mishaps — with your most prized possession.