I was finalizing the paperwork on the purchase of a smartphone when the insurance question came from the sales rep: "Do you want it?" he asked. The phone store was busy, I was more than ready to get out of there, and was on the verge of saying "yes," when I asked "How much is it?" "How much time do I have to decide whether I get it?" and "If something happens to this one, will I get a new phone to replace it?"
The answers: $7.99 a month, 15 days and maybe. Oh, and there's a deductible on the phone, the sales rep said. It's $89. Oh, he added, you have 30 days to decide, not 15. How do I know if I will get a new phone or not if this one needs replacing, I asked? You won't, he said; that will be up to the insurer at that time.
Buying a cell phone can sometimes can be as stressful as buying a car, and the matter of insurance is often thrown in as a last consideration in the process. With smartphones such as iPhones, BlackBerrys and Palm Pres increasingly popular, it makes sense to consider insurance, which can range from about $5 to $8 a month for what the carriers call "advanced" devices.
"It may well be worth it to spend the money for a phone that costs between $200 and $500," said Sue Macomber, telecom specialist for the Utility Consumers' Action Network, a nonprofit organization based in San Diego.
But it's important to know there are more options than the one offered by your wireless carrier. (In the iPhone's case, there is no insurance offered by exclusive carrier AT&T; more on that in a moment.)
Asurion is the company that administers cell phone insurance for several wireless carriers, including Verizon Wireless, AT&T, Sprint and T-Mobile. Even so, monthly insurance and deductible costs vary by carrier and by phone.
For example, T-Mobile says there is a $130 deductible on the new myTouch 3G Google phone ($200 with a two-year contract, but $500 retail) and a $90 deductible on the new BlackBerry Curve 8520 ($130 with a two-year contract, but $300 retail). Sprint says phones like the BlackBerry Tour, Palm Pre and Samsung Instinct have $100 deductibles.
But there are other companies like Safeware, SquareTrade and Best Buy that offer insurance and warranty policies independently, and some home and auto insurance companies let customers add smartphones via a personal articles policy.
Even though a class-action lawsuit settled in 2007 made disclosure about cell phone insurance details — such as deductibles and refurbished phones — clearer, it's still tricky ground to navigate. Some phone sales reps are better than others about knowing — and sharing — those details.
"It's better to search your insurance options first, read the terms and conditions of the insurance policy through the carrier, then go back and buy your phone with the knowledge of exactly what you're getting, what it's going to cost (to replace) and all the contingencies and related obstacles you'll face if the phone is broken, lost or stolen," said Macomber.
"Most people don't think to ask questions; they just sign the papers" for insurance when they're buying a phone, because they're often worn down by the end of the phone sales process, she said.
And wireless carriers do state the details of insurance coverage, but you have to find them, either on their Web sites or in brochures in retail stores.
There are gems like this: "Effective Nov. 3, 2008 ... each replacement phone is subject to a $50 or $125 non-refundable deductible per approved claim depending on the phone model" (AT&T), or "Asurion may fulfill claims with new or remanufactured equipment. In general, claims are fulfilled with the same make and model you claim. If this is not possible, a like-kind make and model will be substituted. Color, feature and accessory compatibility are not guaranteed." (Verizon Wireless)
For less expensive phones, insurance — which can start at about $5 a month — may not make sense, especially when coupled with a $39 deductible, as is the case for basic flip phones like the Motorola MOTO W755 or the LG VX8360.
Consumer Reports says such insurance is not worthwhile "for most consumers."
"The cost of the premium over a year, for example, would be $50 or $60. Tack on the deductible, and you've paid as much as you would have to buy a new phone," the magazine said in one of its reports.
But smartphones are more expensive. The reason the insurance price I was quoted was so high was because I bought a recent-model BlackBerry that would cost more than $500 (retail) to replace. The new iPhone 3GS costs $599 (16 gigabytes) or $699 (32 GB) retail, without a contract (and without a subsidy).
AT&T, via Asurion and insurance underwriter Continental Casualty, does not provide insurance for the iPhone. When asked why the phone can't be insured, an AT&T spokesman did not give an explanation, nor did Continental Casualty have a comment. But Macomber said the phone's high replacement cost is the main reason.
AT&T does let buyers know of Apple's AppleCare Protection Plan, which, for $69, extends warranty coverage for up to two years from the date of the iPhone purchase. The plan has to be purchased while the phone is still under its original one-year warranty, Apple says.
Safeware, which insures other electronic devices, began offering insurance for the iPhone 3G and iPhone 3GS in July, with the policy covering a range of circumstances, including drops, spills and theft, according to spokesman Mike Cole.
The company makes it easy for customers to get an online quote for their phone. I checked Safeware's Web site for my 16 GB iPhone 3G. A one-year policy costs $79.20, including a $7.20 "policy fee," with a deductible of $100, based on coverage of $350 to replace the phone, Safeware said.
SquareTrade, which started in 1999 as a company that resolved disputes between buyers and sellers on eBay, offers warranties — but not insurance — for the iPhone and other smartphones.
"We don't cover theft or loss," said Vince Tseng of the company. However, he said, "the AppleCare plan doesn't cover drops and spills or other accidents. And SquareTrade's plan does, so if you're talking on the phone, and you drop it in the sink, that's something SquareTrade would cover."
Customers need to sign up for SquareTrade's warranty within the first 30 days of buying their phones, Tseng said. On the iPhone, the warranty cost is based by model, but ranges from $4 to $6 a month, he said. There is a $50 deductible that is "only applicable when damage to the phone is caused by an accident."
Tseng said SquareTrade began offering smartphone warranties about five years ago because ""we identified a hole in the marketplace where customers didn't have a third-party option. They were at the mercy of the retailer or the phone carrier to provide them with the only option they had."
Those policies usually state that if a replacement phone is approved, it can be — and likely will be — a refurbished one, not a new one. And refurbished smartphones sometimes have their own problems.
"What SquareTrade offers is a guarantee that if we can't fix your phone, we don't replace it with a refurbished unit," Tseng said. "What we do instead is pay out the full replacement cost of the phone to the customer, so the customer can choose which phone they would like to replace their phone with.
"For example, if you have a BlackBerry Pearl from two years ago, you may not want to replace it with a two-year-old BlackBerry Pearl model. You may either want to replace it with a new one, or maybe you want to move to the iPhone; maybe you want to move to the Pre. SquareTrade gives the consumer that flexibility to go and replace it by offering cash, or a PayPal payment that allows them to go and choose what phone they want to switch to."
If you decide not to buy insurance or additional warranty coverage, Macomber of UCAN recommends keeping eBay in mind for searching for a replacement device, especially if a phone's warranty has expired.
"You can go on eBay and cause yourself less aggravation, get a new phone and sell your old one," she said.