Should I insure my cell phone?

The low-down on cell phone insurance

There are many question marks when it comes to whether you should insure your cell phone or not. Is it worth getting cover for cracked screens? Is my phone covered when I leave the country? What excess will I have to pay?

These are good questions — cell phones have become an important part of our daily lives. So does it make sense to get cover for the rainy days?

Here are a few questions we think are important when considering cell phone insurance:

1. When does it not make sense to insure your phone?

Whether you need cover for your cell phone or not is something that you are going to have to answer for yourself. To help you figure it out, let’s start with when you wouldn’t necessarily need cover.

Your contract is almost ready to be upgraded — lucky you!

When you know you’re going to be getting a new phone and will have no use for your current one then it’s not worth getting it insured.

You have a workable phone in your drawer.

You have a spare phone without any bumps or bruises (including its battery life) that you could downgrade to if something happens to your current one.

You can afford to rebuy your cell phone (in cash).

Most people are somewhere in the middle of being able to replace their phone in cash and not being able to at all. Billionaires can buy new phones as many times as they need, whereas a student who’s been saving up for a new phone wouldn’t necessarily have the spare cash to do so. As long as the cost of buying a new phone is insignificant to you or your bank balance, then consider whether paying a monthly premium is necessary.

Your phone is getting old and you have the money for a new phone.

Some of us keep our phones for years, while others replace them every two years. Whichever way you do it, having the money for a new phone can mean you don’t have to insure your current one (unless you plan on using it at some point).

If you didn't think, ‘ha, that’s me’ when reading the above, then it’s probably worth getting insurance.

2. If I am insuring my phone, what amount should I insure it for?

If it’s a new phone, this part is easy! Just have a look at your receipt to see how much the phone is worth or you could check out to find the price — be sure to look at the right phone model and the correct storage. This is generally the amount you’d insure your phone for.

If it’s an older phone, you may have to do a bit more digging to find the price it’s being sold for, new. Why? Cell phone insurers cover you for the replacement value of your phone — what it would cost to buy your phone new. If your phone is still available to be bought new, this is the price you’d insure it for. Remember this is not what you originally bought it for but rather what it’s being sold for new today (its current new price).

When your model has been discontinued and no longer being sold new, then it’s best to insure your phone for the price of the closest model to the one you have.

My phone isn’t new — what should I insure my old(ish) phone for?

Let’s say you bought your phone three years ago for R8,000 and you now want to insure it. Intuitively, you might want to insure it for its depreciated value. It’s a couple of years old — why should you pay a premium for a new phone you don’t have?

But, let’s say something happens to your current phone and it’s beyond repair. It would then be replaced with a new one (either the same model or the one closest to it) — not a second hand one. This is why insurers recommend you insure your phone for its current new price no matter if it’s new or old.

It is possible to insure your old(ish) phone for its depreciated value, but it’s best to explicitly ask your insurer if that’s possible.

Keep in mind that the number you give as the value for your phone is that max you’ll be paid out if you claim. If the value of a new phone — similar to your current one — is higher than the value you entered, then your payout will be capped at the value you entered (less the excess), and you’ll have to fork out the additional amount to buy a similar phone.

Should I update the value of my phone from time to time?

Updating the insured value of your phone may be particularly relevant in South Africa where the Rand depreciates, as this can lead to large increases in the price of phones.

To avoid coming out short, give a slightly higher value than the current new price of your phone when you buy insurance, so that you’ll still be fine if the prices of phones go up.

On the other hand you can update the value of your phone from time to time depending on your policy. Just check with your insurer. On the Naked app, you can do it all yourself.

3. What excess should I choose?

First let's look at how excesses work

An excess is the amount of money that will come out of your pocket when you claim. If, for example, you have a R1 000 excess and your R10 000 phone is stolen, your insurer will pay R9 000 and you’ll pay R1 000.

Excesses on cell phone insurance come in two flavours: percentage excesses (like 15%) and flat excesses (like R1 000).

A percentage excess of 15%, in the example above, would mean that you would be on the hook for R1 500 while the insurer would pay R8 500.

How should I choose my excess?

The higher your excess the lower your insurance premium will be and vice versa.

So how to choose? The easiest way to calculate the best excess is to determine the amount you can comfortably afford to pay out of your pocket if and when you need to claim. This means you’ll avoid getting into trouble when it comes to claiming while minimising the amount you have to pay for insurance.

One little thing to think about: it’s possible you’ll need to claim more than once in a year, and you’ll need to pay the excess each time. So be sure you have the cash to cover more than one excess, just in case.

4. What’s covered under cell phone insurance?

This is completely dependent on you and what your needs are. Most insurers offer comprehensive cover which (depending on the policy) covers you for theft worldwide, accidental damage (including cracked screens), water damage and more. It's worth making sure that whatever insurance you're considering meets your specific needs.

Are cracked screens and other accidental damages covered?

When your phone meets the floor, it’s an instant ‘AARG!’ moment — it happens to all of us. The policy you have will dictate whether this is covered.

If you have the cash available, the cost of replacing your screen might be low enough so that you don’t need this specific cover. But if this isn't the case, be careful when selecting your excess as you’ll have to pay this amount for cracked screens as well as any other claims, such as theft. Cracked screens are likely to occur more often than theft, so you might want to consider lowering your excess if you hadn’t thought about this.

Am I covered if my phone stops working?

Most phones come with a manufacturer's warranty (usually 24 months). So if your phone suddenly bombs out (given that you haven’t damaged it yourself), this warranty will cover your phone.

It may also be possible to extend this warranty when you buy your phone. These sorts of problems, along with general wear and tear, aren’t covered by cell phone insurance.

Am I covered for water damage?

Talking on the phone whilst doing dishes and having your phone slip into the water usually means it’s game over for your phone, and your conversation. At Naked, we cover water damage but it’s worth researching to see if other policies do.

What if I lose valuable data — am I covered?

In the case of your phone getting stolen or damaged, the cell phone will be covered but typically, the important data such as your favourite photos or contacts that are stored on it won’t be. Luckily, with phones like Apple and Android, you can store your data in the cloud.

Does my cell phone insurance cover me outside South Africa?

It doesn’t matter where you are in the world, phones can still break or go walkabout — check your policy to see whether you’re covered worldwide.

It’s your call…

Deciding whether to insure your phone should be quick and easy. If you choose to insure it, it pays to choose an excess you can afford and to make sure you’re covering everything you need. Then you can get on with more important things in life, relaxed, knowing that you won’t have any surprises if something happens to your phone.