That’s a lot of money spent fixing broken phones. Yet many consumers still opt to forgo insurance in favor of repair. So which is more cost effective?
There are many reasons people opt for smartphone insurance. Some like the sense of security a plan brings, while others realize they tend to be prone to accidents, and they don't want to deal with the hassle associated with constant repairs.
Under certain circumstances, insurance can be a prudent choice. The more expensive your phone, the more you'll recoup the cost of insurance should you have a major incident during the ownership period.
Insurance plans tend to offer the same basic service options. (All prices quoted below may have changed; please check company websites for the most up-to-date information.)
Let's take a look at the AT&T Mobile Protection Pack. This plan has one of the lowest monthly premiums of all the major carriers, at $6.99 - $9.99 per month, depending on location. Various tiers of deductibles range from $50 to $199. The insurance plan covers loss, theft, accidental damages, and out-of-warranty malfunctions.
Sprint, T-Mobile, Verizon all offer similar plans. The cost over the course of 24 months, factoring in deductibles, ranges from $300-400.
Insurance plans can come from a carrier or a third party. These plans mostly cover accidental damage like spills and drops, as well as mechanical breakdowns during "normal use" -- though what "normal use" is can be unclear. Such insurance plans often do not cover mechanical or electrical breakdowns that occur during a manufacturer’s warranty.
Protect Your Bubble is one such plan. They promise next-day resolution, liquid and water damage, cracked screens and accidental damage, mechanical breakdowns and flexible protection -- all for an average price of $5.99/month. The caveats are that the device age limit is 36 months and the deductible is $50. Damage claim limits and replacements per year are both unlimited.
SquareTrade covers a similar array of damage for $8.00/month. Their deductible is $75, and customers are limited to 1 replacement a year. Damage claim limits cover repairs up to the retail value of the phone.
Most insurance plans cost between $6-8.00/month and require a deductible of between $50-79. Damage claim limits vary greatly among plans -- AppleCare, for example, allows 2 replacements per year, SquareTrade only 1, and Protect Your Bubble allows unlimited claims.
The total cost of such plans for a Samsung Galaxy S5 over the course of 24 months, factoring in the cost per claim, averages about $200.
Of course, replacing your actual phone can cost you upwards of $600, so it might make sense to pay $200-400 over the course of two years to ensure you don't have to do so.
Smartphone repair shops can usually offer a better bargain. Repairs tend to cost somewhere between $50 and $150. To fix a cracked screen would set you back about $50, for example. But if the damage your phone sustains is irreparable or would cost more than the phone itself to repair, then you're out of luck.
So Which Is Better: Repair or Insurance?
It ultimately depends on a consumer’s needs. Repair is the smarter decision if you’re worried about losing your data. But you're also betting that your phone won't sustain any kind of catastrophic damage, or that you won't lose or have your phone stolen.
Insurance generally covers all the bases -- but at a price. It gives you the ease of getting a replacement phone quickly -- though often these replacements are refurbished. Insurance also lets you decide where you need the most protection, offering numerous plans that cover everything from theft to damage as a result of dropping.
So like most things in life, it all depends on how much faith you have in your own good luck. Though it helps to ask the following questions:
--Are you clumsy or accident-prone
--Do you travel often?
--Does your phone have a protective case?
--Do you share your phone with kids and others?
--Would a replacement present undue financial hardship?
And don't forget that credit cards also offer device protection within their plans, as do many home insurance policies. American Express, for example, has a purchase protection plan you can take advantage of if you have one of their select cards. The plan will reimburse the amount you charged the card at the time of purchase if the device was damaged or stolen within the first 90 days of purchase. But you'll have to use that money to buy yourself a new device.
Experts tend to take a dim view of smartphone insurance. Bob Hunter, the director of insurance at the Consumer Federation of America has been quoted as saying that insurance "should cover big events that really harm your family's economic situation. Smartphones, he believes, "are not usually worth insuring. Just make sure the contents you have are backed up on the cloud or somewhere."
Consumer Reports agrees. "We think smartphone insurance is a waste of money," a spokesman said.
In their smartphone buying guide, Consumer Reports points out that only 15 percent of the buyers they polled got new phones after their old one broke, and only 2 percent said they replaced a lost or stolen phone.
But the more financially savvy option is for consumers to sell their old device as soon as possible to subsidize the cost of the upgrade, or even to have cash on hand for future repairs. Smartphones are depreciating assets, after all. The sooner you part with a defective or outmoded device, the more money you’ll get from the transaction.
Got more questions about smartphone repair or recommerce? Then contact us. Sourcely is the #1 buyback solution for the wireless industry. We can help you turn yesterday’s devices into today’s profits. Try out our demo today!
Sourcely's co-founder and CEO Nima Nojoumi is committed to creating value for clients and partners in the wireless industry. Nima leads growth at Sourcely, a mobile device trade-in, sales, and marketing platform. Nima is always on the lookout for new partnership opportunities. You can contact him via email at email@example.com or on LinkedIn.