Some bozo grabbed my friend’s purse while she was sitting in Golden Gate Park a while back. Along with her wallet, he snagged her Metro PCS phone. Since she’d been paying a few bucks a month for insurance, she assumed she’d be repaid. Wrong.
After a week of haggling with Metro PCS and then the insurance carrier, she simply gave up in frustration.
My friend’s experience was far from unique. It turns out that many of the policies that cover expensive smartphones have so many loopholes, and so many built-in hurdles to receiving a benefit, that many consumer advocates think they are simply not worth the money.
“It’s an insurance product that borders on the unnecessary,” says Joe Ridout, of Consumer Action in San Francisco. “By the time you’re near the end of a two-year contract, you may well have already paid as much as the phone is worth in monthly premiums,” he told me.
Michael Gikas, a senior electronics editor at Consumer Reports was even blunter. “It’s a bad investment. The deck is stacked against consumers,” he told the San Francisco Chronicle.
Not all of the companies that offer cell phone insurance are difficult to work with, but Ridout’s group gets complaints from consumers who can’t seem to get the company to hand over the money. When my friend finally reached someone at the insurance carrier for MetroPCS, he first made her fill out a long claim form. It wasn’t accepted because it didn’t include a copy of a police report. Like many victims of petty crime, she knew there was no point in going to the police so she hadn’t filed one. But tell that to a company that’s trying its best not to pay up.
There’s another issue as well, and that has to do with the fine print in many of these contracts. When James Temple, a columnist at the San Francisco Chronicle, checked his policy he was shocked to find that, “replacement equipment may, at our option, be refurbished equipment or different equipment of like kind and quality.”
Translation: You might get a different phone. And who’s to say what “like kind and quality” really means. The fine print also excludes damages including cracked screens unless they affect the “mechanical or electrical function” of the phone. Again, who decides what really affects the use of the phone? And don’t forget about the deductible, which can be quite large.
No doubt, says Ridout, that there are some people who make out very well when they have an insurance claim related to a cell phone. If you lose your $199 iPhone early in your contract without insurance, a replacement will cost more than twice that because you’d be paying the full, unsubsidized price. But that’s an exception. For most of us, cell phone insurance turns out to be a really bad buy. Avoid it.
San Francisco journalist Bill Snyder writes frequently about business and technology. His work appears regularly in CIO.com and the publications of Stanford's Graduate School of Business and the Haas School of Business at the University of California at Berkeley. He welcomes your comments and suggestions.