If you have a bad habit of breaking your phone or dropping it in water, you probably have thought about getting cell phone insurance. This insurance will pay for a replacement or repairs if you damage or lose your phone. Some might even cover stolen phones, too.
Does this sound too good to be true? Cell phone insurance may not be the perfect solution to your accident-prone phone. Here’s why:
Fact #1: Your Insurance May Not Cover the Full Repair Costs
Most insurers set a limit on how much they’re willing to spend to repair your phone. So, if your repair exceeds this limit, you may have to pay the difference.
This amount could be a couple of bucks or another couple of hundred dollars, depending on your phone and the damage. Do you have that kind of money?
If you don’t have enough savings available to cover your costs, consider borrowing an online line of credit from Fora carefully. You can find out more about how Fora Credit works to determine if a line of credit is the right fit for this emergency.
Generally, you should only ever use an online line of credit when you urgently need a phone for work or safety reasons and your usual savings aren’t enough.
Fact #2: You Might Have to Pay a Deductible
Like many insurances, your cell phone plan might come with a deductible. This is the amount you have to pay out of pocket first before your insurer covers the rest.
Depending on your plan, a deductible may be incredibly high. According to Consumer Reports, a deductible can run as much as $225. When a cracked screen repair — the most common cell phone repair — averages $277, you aren’t getting much help from your insurer.
Fact #3: Your Pay Out May Be Less Than What You Paid in Premiums
Think of it this way, if you pay $15 a month for a year, plus a $225 deductible, you’ve paid $369 of your own money for a replacement or repair. If you’ve had insurance for multiple years, your collective payments will likely greatly exceed the cost covered by insurance.
You could sidestep insurance altogether by saving the cost of your monthly cell phone insurance premiums and putting it in an emergency fund.
Besides saving you the hassle of filing a claim, this strategy would save you money in the long run. Not only will you avoid overpaying for a lacklustre payout, but you’ll also eventually grow an impressive fund that can accrue interest in a savings account.
Fact #4: You Might Not Get the Phone You Expect
While most insurers will do their best to replace your phone with the exact make and model, it’s not guaranteed. You may wind up with something slightly different from what you usually use.
There’s also a good chance you don’t get a new phone at all. Many insurance and cell companies will provide refurbished mobile phones when processing claims.
Fact #5: You May Never Need it
Lastly, the final disappointing thing about cell phone insurance is that there is a chance you won’t ever need it. In other words, you’ll pay a monthly premium and never recoup those costs through a phone replacement or repair.
Consider insurance carefully. Some people swear by it, but others run into the problems listed above. You’ll have to weigh the odds to determine if it’s worth your money.
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