Budgeting: Is phone insurance worth it? The sums compared

Is phone insurance worth it?

Phones are expensive, fragile and go everywhere with us, so insurance can seem like a sensible precaution. But phone insurance often costs more than it pays back. Monthly premiums add up over the life of a phone, most policies charge an excess when you claim, and many common problems, like a cracked screen, cost less to repair than the total you'd pay in premiums.

Whether it's worth it depends on how expensive your phone is, how likely you are to damage or lose it, whether you could afford to repair or replace it yourself and whether you already have cover elsewhere.

How do the sums compare?

Here's a worked example over two years, with one cracked screen, in round numbers that work in any currency:

With insurance, you'd pay 240 in premiums plus a 50 excess when you claim, so 290 in total. Without it, the repair costs 200. If you put the 10 a month aside yourself instead, you'd have 240 saved, pay for the repair and still have 40 left. And if nothing breaks, you keep all of it.

When is phone insurance worth it?

Your phone is very expensive

If losing a phone worth 1,000 would be a serious problem and you couldn't replace it, insurance that covers loss and theft may give useful peace of mind.

You have a history of damage

If you've broken several phones, you're more likely to claim, which can tip the sums in favour of insurance.

You couldn't cover a sudden cost

If an unexpected 200 or 1,000 bill would mean borrowing, insurance may be worth it. Building an emergency fund is the longer-term fix.

You need a quick replacement for work

Some policies replace phones quickly, which matters if you depend on yours for income.

When is it not worth it?

You already have cover

Home insurance, packaged bank accounts and some credit cards include phone cover. Check before buying a separate policy, since you may be paying twice. How to save money on home insurance covers what policies often include.

Your phone is older or cheaper

As a phone ages, its value falls, but premiums often don't. For older or budget phones, paying for repairs is usually cheaper.

The excess is high

A high excess means you'd pay a lot even when you claim, which can wipe out the benefit for smaller repairs.

Exclusions rule out likely problems

Some policies exclude loss, unattended phones, water damage or wear and tear. Read what's covered before buying.

What about manufacturer care plans?

Plans sold by phone makers often cover accidental damage with a set fee per repair, and sometimes loss or theft. They work like insurance, so the same sums apply. Compare the total cost over the time you'll keep the phone with likely repair costs. Is an extended warranty worth it? covers similar products for other gadgets.

How do you protect your phone cheaply?

Use a case and screen protector

A good case and screen protector cost little and prevent many of the most common repairs.

Self-insure

Put the amount you'd spend on premiums into savings each month. Over time, it builds a fund for repairs or a replacement.

Turn on tracking and backups

Location tracking helps find a lost phone, and backups protect your photos and data if it can't be recovered.

Buy outright or second-hand

Cheaper phones are cheaper to replace. Should you buy a phone outright or on contract? covers the full cost of each option.

It's worth looking at your own track record. If you've had the same phone for years without a scratch, insurance is probably costing you money. If you've cracked a screen every year, the sums may look different. Your own history is a better guide than the worst-case stories used to sell cover at the checkout.

If you decide to buy insurance, compare the total cost over the time you'll keep the phone, including the excess, rather than the monthly price alone. Cancel it when the phone gets older and cheaper to replace, since many people keep paying long after the cover stops being good value.

Finally, set a reminder for when any free cover or introductory price ends. Some policies roll on at a higher price without much notice.

How can Wealtie help you decide?

If you have phone insurance, add it as a recurring transaction and see what it costs over a year. If you self-insure instead, log the monthly amount you set aside, and track repairs in a tech expense category so you know what your phone costs to keep running.