Is Smartphone Insurance a Good Deal?
Key Points
- Insurance can be made to look cheap when paid monthly- however, it can add up significantly over time.
- The payable excess and deductibles on some policies can make many policies much less competitive than they first appear.
- Although repair costs (especially screen replacement) can be high for new models, they often fall drastically within months. This can make insurance much poorer value if you’re continuing to pay the original rate.
- With one policy, we calculated that you’d have to have the screen replaced eleven times on an iPhone 7 make it cheaper than simply bringing it to us. (Except that you’re limited to six claims anyway!)
- If offered, replacement devices are usually refurbishments, not new. These can look as “good as new” externally, but are often badly-repaired and unreliable customer returns on the inside.
- Always consider the total– not monthly- cost you’ll end up paying for repairs, including excesses and deductibles. Keep an eye out on other limitations, such as the number of times you can claim.
Introduction
Everyone likes to own the latest mobile phone- and when a new handset is released there are always many networks fighting for your business with apparently tempting deals on offer.
With low monthly payments on contracts it’s often easy to forget that the handset you’re paying (say) £30 a month for is actually worth more than £600. In the hands of a pushy salesman on commission for any extras he can sell, an extra £8.50 a month for insurance doesn’t sound like too bad a deal. But is insurance really worth it- and what are you getting for your money?
We Did the Maths, and It Doesn’t Look Good… (Actually, It Looks Awful)
At the time of writing (late September 2017), Three- for example- are offering their “Three Rescue” plan (archived copy here) which covers you for damage to your phone. The price varies according to the value of your phone, but for the Apple iPhone 7 and Samsung Galaxy S7 Edge it costs £8.50 per month (totalling £204 over a 24 month contract period) with an excess of £80 per claim.
Screen replacement is by far our most common repair on mobile phones. At the time of writing, our price is £279 for the S7 Edge screen and £99 for the iPhone 7. This compares to the £284 (i.e. £204 premiums + £80 excess) you’d effectively pay if you had to make a single claim on your insurance over that 24 month period.
In the case of the iPhone 7, the £80 excess itself isn’t much cheaper than our £99 all-in price. This means that you’d have to claim eleven times just to break even on the insurance!… except that you can’t do that, because you’re limited to three claims a year (i.e. six over a two year period)!
Even with the S7 Edge- where screen repair remains expensive due to the high cost and continuing shortage of replacement AMOLED displays- it still works out cheaper to just pay for the repair if you only need one screen replacement over the two-year period.
Of course, if you don’t claim at all, it’s even worse- you’ve handed over £204 for absolutely nothing!
Falling Prices Can Make Insurance a Poorer Deal Later On
It’s worth noting that that screen replacement prices are typically high when phones are newly-launched, due to the scarcity and cost of replacement displays and components. When it was relatively new, our iPhone 7 screen repairs cost £199, so the insurance might not have seemed quite such abysmal value. (Though you’d have still needed two screen replacements just to break even).
Problem with looking at it this way is that (in most cases) screen replacement prices normally fall drastically within a few months. There are a few exceptions- such as the AMOLED-based flagship Samsung S7 Edge- but generally speaking, prices fall- and fast.
If you’re still paying the same insurance rates on (say) that iPhone 7 that you first agreed to when it was new, chances are you’re now overpaying- regardless of who your insurance si with.
Is It Covered by the Warranty Anyway?
So what about other issues that can cause your phone to stop working? Depending on the problem it may already be covered under the manufacturer’s warranty. Samsung devices carry a twenty four month warranty and Apple one year. If there is no physical damage to the device then you may get it repaired by the manufacturer regardless, especially if the cause is a known issue.
Is That Replacement Handset Such a Good Deal?
So, what is the insurance policy good for? If the device is beyond economic repair (e.g. if it suffered liquid damage), and the cost to fix the device outweighs its second-hand value then- in this case- the insurance policy would replace the device. So, as long as the value is more than the cost of 24 month’s insurance it’s a good deal- right?
Well… not necessarily, since most insurance policies won’t give you a brand new device. The replacement handset will be “refurbished” and although you would expect the device to be “fit for purpose” this isn’t always the case. We’ve worked on many “refurbished” devices, including those that come from the manufacturer you would expect to be as close to as new as possible. On the outside, they may look brand new, but inside they’ve had major work done to fix them. Only last week we worked on an iPad Mini that was refurbished by Apple.
This iPad was brought to us because it wasn’t turning on. When we opened the device it was clear that the CPU and Power Management Unit (PMU) had been replaced, and the motherboard had been left covered in flux (as can be seen on the shiny areas in our photos above). Changing the CPU and PMU is no mean task and we would class this as major work. Furthermore, there was no underfill around these chips as you would see in a brand new iPad fresh from the factory. The underfill is important because it protects the chips from movement if the device is dropped. It’s highly likely that the lack of underfill was the cause of the fault the customer wanted us to fix.
Let’s not forget- this was an official warranty replacement. More to the point, it’s not an isolated cause- we’ve had numerous “refurbished” warranty replacement devices brought in to us exhibiting similarly shoddy workmanship.
This is one benefit to having your device repaired locally. Although the cost may seem high- depending on the repair and the device in question- you at least know its history. You’re not having it replaced with someone else’s problem handset that might have been replace several times.
Conclusion
To be fair, these criticisms are based on one company’s offering. The prices for insuring other phones- and from other insurance companies- may be significantly more competitive.
However, we think that many of these “point of purchase” deals are very poor value, reliant on obscuring the true cost behind “low” monthly payments and hoping customers don’t do the maths (nor notice the excess charges).
If you decide to consider insurance, ask yourself
- What’s the total cost I’m paying over the period of the contract?
- What’s the excess on the cost of any repairs?
- How much does it effectively cost me if I claim once? Or twice?
- How does that compare to simply paying for repairs as needed?
- Is the typically high cost of repairs for your newly released model likely to fall within a few months (as it does in most cases)?
- What are the limitations of the warranty?
- Are any “free” replacements as good as they sound, or is it possible they’re officially “refurbished” models that look the part but are often far from new, badly-repaired and generally full of problems inside?
