Should you get month-to-month phone insurance

When you buy a new smartphone on contract, your wireless carrier will ask you if you’d like to protect your purchase with insurance. It probably sounds like a great deal — pay $5 – $11 per month, and you won’t have to worry about footing a $700 bill if your phone stops working, gets damaged, or is lost or stolen.

But hang on a second — it’s not that easy. Phone insurance plans come with high deductibles and a cap on the number of claims you can make, which means they could be a waste of your money.

The plans

There are two ways to get month-to-month phone insurance: You can purchase it from your wireless carrier, in which case you’ll simply pay the premium as an add-on to your wireless bill; or you can purchase it directly from a third-party insurance company such as SquareTrade.

The main difference between the two is that carrier-provided insurance usually covers device malfunction, damage, loss, and theft, while SquareTrade only covers malfunction and damage. Many carriers, including Verizon and AT&T, offer their plans through the third-party insurance company Asurion.

Verizon offers four protection tiers. The top tier, called Total Mobile Protection (TMP), costs $11 per month for smartphones, protects against device malfunction, damage, loss, and theft, and carries a $99 to $199 deductible, depending on the device. Verizon’s deductibles tend to be a little lower — most high-end Android phones won’t hit that $199 deductible. TMP (“Total Equipment Coverage”) offers the same protection as the second-highest tier, except TMP includes a tech coach feature, which basically means you can chat with Verizon about your device (you don’t need this).

TEC is a combination of the lower two tiers, Asurion Wireless Phone Protection ($7.15 per month for smartphones, protects against everything except device malfunction) and Verizon Wireless Extended Warranty ($3 per month for smartphones, protects against device malfunction).

AT&T’s insurance costs $6.99 per month per enrolled number, protects against device malfunction, damage, loss, and theft, and carries a $50, $125, or $199 deductible, depending on the device. Most high-end smartphones will hit the top deductible tier, so expect your deductible to be $199. Unlike Verizon, however, AT&T rewards you for not filing claims — you get a deductible discount if you haven’t filed a claim in the last six months ($149 vs. $199) or 12 months ($99 vs. $149).

Sprint offers a two-tiered insurance plan — like Verizon, the top tier ($13/month) simply includes tech support and device tutorials. Sprint’s insurance costs $9 – $11/month, depending on which deductible tier your device is in. There are four deductible tiers: $50, $100, $150, and $200. Most smartphones will be in the top two deductible tiers, and will therefore cost $11/month. Like Verizon and AT&T, Sprint uses Asurion — so its plan covers device malfunction, damage, loss, and theft.

T-Mobile’s insurance costs $8 per month and protects against malfunction, damage, loss, and theft. The plan includes a $20 to $175 deductible, and most high-end smartphones will end up costing between $150 and $175. If you’re already enrolled in T-Mobile’s JUMP program, which lets you upgrade your phone once you’ve paid off 50 percent of its cost, insurance is included.

SquareTrade is one of the most popular third-party insurance providers, and it’s cheaper than most carrier-provided options. Of course, it also offers less protection — with SquareTrade, you won’t be protected against loss or theft. SquareTrade plans cost $5 per month for smartphones (cheaper if you purchase one or two years in advance) with a $75 deductible. Because the company only covers damage, it will only repair your phone — not replace it. In the event that your phone is damaged beyond repair, SquareTrade will just give you money to replace it (enough for a refurbished phone — not a new one).

Should you get phone insurance or not?

This is a difficult question to answer, because the answer is highly dependent on the individual. If you live in an area where phone theft is rampant, or if you’re the type of person who’s likely to lose your phone, insurance could save you hundreds of dollars. But if you’re just clumsy, you may not come out ahead at all — Apple will fix an iPhone 6 screen for around $110, which is cheaper than a year’s worth of Verizon insurance.

Month-to-month phone insurance comes with low premiums, high deductibles, and a limit on claims (Asurion lets you make two claims per year, with a cap of $1500 per claim). If you make one claim per year, you’ll pay between $270 and $330 for a new phone — and that phone probably won’t be new. The insurance company has the right to choose whether they want to repair your phone or replace it with a phone of equal value, which means you’re likely to get a refurbished phone in lieu of a brand-new one.

Also, device-specific insurance is not the only option. If you purchased your phone with a credit card, your credit card company may offer an extended warranty that covers device malfunction once the manufacturer’s warranty expires. Also, if you pay your phone bill with a credit card, your credit card company may offer some protection (my Wells Fargo card offers $600 worth of protection, subject to a $25 deductible, against damage or theft. And if you have renters insurance, your phone is most likely covered in your policy. Renters insurance is usually subject to a higher deductible ($500+), but if your purse is stolen with your smartphone in it, you’ll quickly hit that limit.

For many people, month-to-month phone insurance is $132 per year for peace of mind, and that’s it. But for some people, especially those who are likely to lose or damage their phone multiple times in a year, it can be worth it — just make sure you check out your other options first.