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Is Cell Phone Insurance Worth It?

It may sound like a good idea to pay a little extra each month for the security of knowing you could get a replacement phone any time you need it. But month-to-month cellphone insurance isn't always the helpful solution it appears to be.

High deductibles, policy restrictions, and limited replacement options can make the plans less desirable, industry watchers caution: "95% or more of the time, cell phone insurance is not worth buying," says Logan Abbott, president of Wirefly, an online comparison shopping tool for cell phone plans.

If you are considering a plan, make sure you understand a few key things.

Who you can buy insurance from

If you do want to buy insurance, you have two basic options: from your wireless provider or from a third-party company such as SquareTrade. Insurance offered by wireless providers tends to be more robust, covering device malfunction, damage, loss and theft, but it tends to cost more — roughly $10 a month for full insurance, although some providers offer tiers with more limited coverage. (Verizon, for example, offers four insurance tiers ranging in price from $3 to $11 a month.) Third-party insurers typically cover only malfunction and damage — which is fine if you drop your phone in a puddle, less so if it gets stolen — and tends to cost $7 a month.

How big a deductible you'd face

No matter who you buy from, you'll still wind up paying a deductible for each claim you file — and that can come as a nasty shock. "Most people when they sign up for these insurance plans don’t realize there is a fairly large deductible. They assume the monthly payment is it," says Abbott. The deductible on wireless carrier plans typically ranges from $50 to $200, MONEY finds, depending on the kind of phone you own and how new it is. If you've got a brand-new iPhone, expect to be at the top end of that deductible range. Third-party insurance providers offer a lower deductible — $99 for SquareTrade, for instance — but, remember, they also cover fewer types of incidents.

Some companies, such as AT&T, reward you for not filing a claim by offering a deductible discount. Six months without incident allows you to save 25% to 50% off the standard deductible.

What replacement phone you could get

If your phone cannot be repaired, most insurance policies say they will provide you with a replacement that is generally comparable to the device you had — but you might not even get the same model or brand as before, and you may wind up with a refurbished phone rather than a brand new one. SquareTrade says it will either repair your phone or give you a reimbursement amount based on the retail value of the phone for your carrier.

What your bottom line will be

All of this means that, even if you have to make a claim, there's a good chance the insurance won't have been worth it. Let's say you got a smartphone last year, paid $10 a month for the first year of insurance, then lost the phone. You already spent $120, your deductible is probably another $200, and your insurer could give you a refurbished version of last year's model rather than a new phone. Add in the fact that phones typically come with a manufacturer warranty for the first year — and are becoming much more durable — and "there is less and less of a reason to get insurance," Abbott says.

For more MONEY coverage, check out The Best Cell Phone Plans of 2016.

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