Lawsuit Demands Refunds on Cell Phone Insurance

A report from NPR News this morning talks about a lawsuit agains cell phone insurance companies. I used to work at T-Mobile as a customer service representative and sold the insurance provided by Asurion. Here are some things you need to keep in mind when you buy cell phone insurance:

1. Your $4 to $5 per month will total up to $60 a year.
2. Most companies will give you a free phone as you get closer to the end of your contract.
3. T-mobile, I can't say about the other companies, will repair your phone for about $70 or give you a new for $70 if yours is irrepairable. You will get the same model or one of equal value, which will be refurbished. If it is defective, you'll get another at no charge.

So, if you break your phone, or drop it in the water, or somehow damage it so that the warranty is voided, you'll spend $70 using T-mobile warranty. Using the warranty, you do need to send in the poor phone. With insurance, you'll spend the $60 per year in premiums, plus a deductible. You can use the insurance if you lost your phone or had it stolen. So here are your options.

If you had a cheap of free phone, forget the insurance. The warranty will cover most problems anyway. If anything happens to your cheap or free phone, you won't spend so much to replace it. In fact, you can probably get one off of ebay.

Insurance is worth the premiums if you have one of the expensive $300 to $500 handsets. This is because the handsets are worth many times what the premiums will cost. You get about 3 or 4 claims per year. So, if you have a blackberry, pocket pc phone, treo, or sidekick, go for the insurance. I used insurance and warranty, which you are allowed to do, as an employee at T-mobile for my treo. I never would have paid insurance for my cheap Nokia 3595. Now, I use Virgin prepaid, so I can get another phone for as little as $40.

So, the idea is simple. Cheap phone, no insurance. Expensive phone, get insurance. Even if you get a refurbished replacement phone from the insurance, you're better off than being left without a phone. If it's defective, it's covered by warranty.