When purchasing electronics at the checkout counter, you likely anticipate the extended warranty pitch or gadget insurance add-on spiel. In an effort to save money, some shoppers wave off these sales tactics as a money (and time) wasting nuisance, but certain big-ticket purchases may leave you questioning whether an extended warranty is actually worth it. For many Americans, the answer is no, but a recent study may prompt reconsideration.
Lookout Labs conducted a study about smartphone loss cases in 2011 with the help of a lost phone app called Lookout. Last year, they revealed protecting your smartphone with cell phone insurance may come in handy after all. The study found that a smartphone was lost every 3.5 seconds with a total of $30 billion wasted in 2o11 on lost smartphones alone.
Lost and stolen cell phones are only one reason to opt for an extended warranty for added protection; self-inflicted damage on gadgets may cause you to regret passing on add-on insurance.
According to a Plaxo study, 19 percent of cell phone owners drop their phones into a toilet. This clumsiness often renders the device unusable, resulting in expensive replacement costs.
With the question of “what if” constantly plaguing shoppers — whether cell phones face the threat of theft or your own absentmindedness — evaluating whether an extended warranty or cell phone insurance are practical based on their use becomes a much more serious consideration.
The Cost of Cell Phone Insurance
In today’s cell phone-driven age, cell phone insurance is among the most popular types of gadget insurance sold. Retail staff tend to highlight the fact that with just a $4-$7 low monthly fee tacked onto your cell phone bill, you can insure your phone against damage, loss or theft, regardless of who is at fault. Buyers are told they can simply file a claim with the insurance provider, and depending on the insurer, consumers will receive a check in the mail to cover the loss or a replacement phone.
Users who have a forgetful habit of leaving their cell phones behind at restaurants or are constantly dropping their phones on unyielding surfaces may find that paying up to about $168 over the course of a 2-year contract to safeguard their phones are well worth the price.
This may especially be true for those whose smartphone’s unsubsidized value exceeds the cost of the insurance. Others, however, find that extended warranty offers and cell phone insurance create more aggravation than going without the protection. Shoppers may contend with additional challenges associated with cell phone insurance just to get the result they were promised at the register.
What You Don’t Know About Gadget Insurance
Shoppers may be okay with the $168 charge gadget insurance demands, but will they be okay with what that insurance buys? Consumers often misinterpret the terms of their device’s insurance coverage, assuming that they’re guaranteed an exact replacement product simply by calling the insurance provider. Unfortunately, this is not always the case.
1. Don’t Forget About the Deductible
Like with other insurance services, you may need to pay a deductible in order to get a replacement device, such as a cell phone. This deductible can range from servicer to servicer and may depend on the type of phone covered by the insurance. Typically, deductibles can be about $50-$100, so consider whether spending potentially $260 on a replacement is really worth your time or if savings can be accomplished by finding a replacement phone on your own.
2. Read the Fine Print
A mistake too often made is taking the cashier’s summarized version of the extended warranty or insurance at face value. Before signing up for additional product protection, read into what exactly the gadget or cell phone insurance covers.
Does it only cover theft and not damage done by the owner? Does it exclude water damage coverage or only protect shoppers against manufacturer defects? Read the fine print to find out before spending hundreds of dollars on what could possibly be a lost cause.
Additionally, there may be convoluted steps hidden in the terms and conditions to file a claim. Some insurers require an official police report for lost or stolen gadgets or require that you notify the insurer of the lost device within a certain time frame to make a claim.
3. May Not be a Direct Replacement
Those with insurance may falsely believe they’ll get exactly the same item they purchased if it needs to be replaced. In actuality, some servicers don’t replace lost or damaged phones with new devices; instead, customers may receive refurbished cell phones.
Refurbished items were bought at one point, then returned to the manufacturer due to a defect. The manufacturer then repairs or corrects the defect and issues it for resale as a refurbished item, or sends these products to customers who have requested a replacement. While the device should function like a new phone, it is definitely not a brand new phone.
Another issue with replacements is when the item to be replaced is no longer in stock or has been discontinued. Customers with cell phone insurance will typically be given a comparable alternative (for some this alternative even turns into an updated device), but this may not necessarily be good enough for those who have grown attached to the functionality of their original device.
Should You Buy an Extended Warranty?
Deciding whether or not it’s smarter to skip out on the extended warranty or additional insurance really depends on how much of a risk shoppers are willing to shoulder.
For example, a new 16GB iPhone 4S that isn’t tied to a contract retails for $649 in stores and a used one averages about $400 on Craigslist. In this case, the cost of cell phone insurance and the deductible may be worth spending for a replacement. Users also get the added peace of mind that the replacement product is legitimate and in working order, rather than the risk of dealing with a shady third-party private seller.
However, if the value of the original device is lower than the cost to insure the item, it may be worth it to absorb the loss and find a cheaper replacement elsewhere. The important thing to keep in mind is that insurance is not for everyone and it certainly isn’t practical for every electronic purchase.