When you decide it's time to upgrade to a new smartphone, it sets in motion a major shopping project. These are, after all, pocket-sized computers these days, with a constellation of apps, cameras, voice recognition tools and a host of other bells and whistles.
But once you have settled on a handset, another, less glamorous decision awaits: Do you want insurance?
You'd be hard pressed to find a tribe of consumers more passionate about a product line than Apple fans, and yet there is no consensus about whether it makes sense to insure an iPhone.
That owes at least in part to the tangle of coverage options available. Each option is different, and all have fine print. But considering that a new 16 GB iPhone 4S carries a retail price of $649, insurance might be worth a look.
"The first question is what kind of things do you want to be covered for?" says Tim Stadthaus, a spokesman for Asurion, a leading provider of insurance coverage for mobile devices. "Second, it's what kind of process do you want to go through to get a replacement phone?"
Indeed, the decision of whether, and to what extent, an iPhone should be insured comes down to the same cost-risk calculus common to all types of insurance. If you have a history of cracked screens or an unfortunate habit of losing phones, insurance might seem a wise investment. Then again, if you are more cautious, you might decide that the cost of insuring an iPhone is too much to justify in light of the relatively remote possibility that something will happen to your beloved device.
While the value of iPhone insurance is a subject of debate, it's worth taking a look at the various options that you have to protect your investment.
Apple's in-house extended warranty and insurance program, Apple Care+, is a popular choice for iPhone owners. Unlike plans available through the wireless carriers, Apple Care+ has no monthly fee, but instead carries a one-time upfront cost of $99.
All of Apple's hardware comes with a year's worth of repair coverage, should your device malfunction or stop working properly, and 90 days of telephone technical support. With Apple Care+, both repairs and support are extended for two years, dating from the time of purchase. It adds support for incidents of accidental damage, for instance a cracked screen.
There are some limitations. The Apple Care+ package only includes support for two accidental damage incidents, and each carries a $49 fee.
Loss and theft – which account for nearly 50 percent of the mobile-device claims that Asurion processes – are not covered under Apple Care+.
"This plan only covers covered equipment that is returned to Apple in its entirety," read the terms and conditions of the Apple Care+ for iPhone agreement.
So a cracked screen, water damage and similar events--up to two in two years--are likely to be covered, but users are out of luck if their phone is lost or stolen. (However, many users have found some solace in apps that help them locate lost phones.)
You can also purchase insurance through your phone carrier. AT&T and Verizon have contracted with Asurion to provide insurance coverage for their respective lines of mobile devices.
AT&T, which enjoyed an exclusive carrier arrangement with Apple for the first iterations of the iPhone and remains the leading service provider for the device, offers an extensive mobile insurance program through its partnership with Asurion. Mobile devices, such as tablet computers and smartphones, are classified in three tiers, with corresponding deductibles. All iPhones are classified as tier 3 devices, which carry a deductible of $199, the highest level in the plan.
For some users, that hefty deductible is a deal breaker, particularly when compared with the far more modest $49 fee that Apple charges per incident. But then again, lost or stolen phones are covered under the AT&T Asurion plan, which is not the case with Apple Care+. While the $199 cost to replace the device is hardly cheap, it compares favorably to the cost of buying a new iPhone 4S at retail.
Asurion positions its coverage as a more comprehensive package than Apple Care+. It also boasts of a quick turnaround time for replacement devices, ideally within a day, although that is subject to manufacturer availability.
Stadthaus says keeping the wireless customers happy by offering a plan that doesn't have a lot of exclusions helps the carriers better serve them.
"We really focus from a carrier perspective. Typically when people have a problem with their phone they don't want to have to be reading the fine print of what's in and what's out," Stadthaus says. "Typically the carriers look to see comprehensive coverage."
AT&T subscribers have two insurance options from Asurion. One, at $6.99 a month, provides the basic insurance. For $9.99 a month, AT&T's Asurion plan offers the Mobile Protection Pack, which includes device insurance as well as expanded support and a device location service.
Asurion also insures iPhones through Verizon Wireless' Total Equipment Coverage plan, offering a $9.99 monthly plan and a deductible of either $169 or $199, depending on the iPhone model.
Asurion's plans with both AT&T and Verizon have a limit of two device replacements in a 12-month period.
Sprint, the most recent carrier to pick up the iPhone, does not offer insurance. Stadthaus, however, says he's "hopeful" that Sprint will come on board, but declined to comment further on talks between the Sprint and Asurion.
If you're looking for an alternative to the coverage plans offered by Apple and Asurion through the carriers, a number of third-party insurers now offer iPhone insurance policies. Many advertise lower rates or cheaper deductibles, along with other perks unavailable through the Apple and Asurion plans.
Safeware, for instance, offers a $50 deductible and does not cap the number of claims that it will accept in a 12-month period. For an iPhone 4S 16 GB, Safeware provided a quote of $196 for a two-year term.
Low-cost and fairly comprehensive plans are also available from The Worth Ave. Group (iPhone 4S 16GB: two years, $178; $50 deductible), GoCare (two years, $97; $50 deductible) and SquareTrade (two years, $99.99; $50 deductible).
You have another avenue of iPhone coverage available in the form of a renters or homeowners insurance a policy. The provisions of those plans can vary widely, so check with your provider to ensure coverage.
"iPhones and iPads will be covered as personal property under homeowners insurance policies. Most renter policies will also cover them as personal property," says Edward Graves, associate professor of insurance at The American College in Bryn Mawr, Pa.
Graves advises you to write down the serial number of your product on your receipt and keep that receipt with your records. That information will help in the processing of a claim.
Deductibles on homeowner and renter insurance policies are typically high enough to negate the value of replacing a phone, unless the loss was part of a larger claim stemming from an event such as a fire or robbery.
"Recovery under a claim will depend on the type of coverage. Replacement cost coverage will pay for a replacement. Actual cash value coverage will only pay the depreciated value of the used article," Graves says, adding that consumers can expect the payout from actual cash value coverage to be "significantly less than the cost to replace it."
Ultimately, the choice to take out an insurance policy on an iPhone is an individual decision. Given the wide variations in the coverage policies available, it seems clear that there is no one-size-fits-all solution.
"Ultimately I think consumers have to decide what the right coverage is for them in terms of what type of events do they want to make sure they're covered for," Stadthaus says.
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