Is that smartphone protection program worth it?

Is that smartphone protection program worth it?

Summary: Are those smartphone protection and replacement plans really worth an added fee tacked on to your monthly bill? We ran some numbers, created some spiffy charts, and came up with a few surprising answers.

TOPICS: Mobility

My wife and I recently replaced our worn-out iPhones with brand new, shiny Samsung Galaxy S4s. As part of the sales process, the Verizon store rep recommended we get a phone replacement plan. After all, he said, if we drop or lose the phone, we could be out a lot of money.

"Is it really worth it?" my wife asked. "After all, the most we'd be out is $200 for another phone." Her initial assumption was that the phone cost $200, because that's what we were paying for it. She wasn't accounting for the full-freight price of the phone which was being reduced by virtue of our two year contract.

"Oh, no," the rep said. "That's a $650 phone. You'd be much safer if you had the phone protection plan. After all, it's only $5.18 per month."

We turned down the program (additional details PDF), but were assured we could sign up anytime in the next 30 days. That $650 number sat with me for the whole next day, until I decided to get my math out of mothballs and play with some numbers. After all, I've carried expensive phones for years and years, and I've never lost one. Neither has my wife. Of course, there's always a first time.

Let's first gather the givens. All the numbers I'm using are for Verizon, but the other carriers are quite similar. The Samsung Galaxy S4 and the iPhone 5 have the same buy-in. That's $200 with a two-year phone contract. The protection plan costs $5.18 per month.

Now, here's the kicker. If you lose your phone, you don't just get a new one. You have to pay $99. You're allowed to lose two phones in a 12-month period, but still, each has a $99 "deductable."


Here's our first chart, "Cumulative cost of phone replacement." This is what you'd pay for the replacement plan, based on how long you had your phone. As you can see, if you lost your phone right after you bought it, it would only cost you $104 to replace it. By contrast, if you lost your phone 18 months in, you would have spent $192 (given the accumulation of monthly $5.18 charges) to replace it.


Let's next look at implied savings. The sales rep said that the S4 is a $650 phone. It's actually $649, the same as the base iPhone 5. Let's look at how much you'd save if you had the phone protection plan:


As you can see, the implied savings ranges from a high of $545 down to a low of $426. If a replacement phone would cost you that much, it would be worth a protection plan, wouldn't it?

Maybe, but perhaps there's a detail that's not being included here: terminating the plan and getting a new phone. When you buy a phone and sign up for a two year plan, you're agreeing to keep the plan to help the carrier offset the discounted cost of the phone. But all smartphone plans of this type allow for early termination. Many buyers like changing their phone whenever a newer, spiffier one comes out, and the carriers count on making some extra cash on the early termination.

Verizon's plan is very similar to the AT&T early termination option that I just recently exercised. It starts at $350 and drops by $10 for each month you have your service. So, for example, if you terminate at the end of a year, you'd wind up paying $230.

That's where these programs get interesting, because instead of having to buy a new phone if you lose it, you could just terminate your plan and start over, paying another $200 for a better newer phone. You may have to go with a different carrier, but you can cross that bridge when you come to it. So let's see how that holds up under the scrutiny of arithmetic.


As you can see, your worst exposure is $550 on the very first month, down to $342 by month 24.

At this point, you can see you have two replacement strategies: via the protection plan or simply by terminating the program and buying a new phone. The obvious question is how do these options compare. Here you go.


As this chart shows, if you lose your phone in the first month, the replacement plan can save you almost $450 over early termination. On the other hand, if you lose your phone after a year, the replacement plan would only save you $289.

This allows us to frame the gamble you're taking. First, your worst case exposure, losing a phone on day 1, is $550 using the early termination plan, not $650. But given that the replacement plan has a deductable of $99, you'd wind up paying as much as $223 to replace that phone near the end of the program. Of course, the reality is you'd probably just wait out the program or pay the last few months of fees.

If you don't get the protection plan and use the early termination plan instead, your worst exposure is $550, down to $342. Compare that to adding $5.18 to your monthly bill and spending up to $124 if you don't exercise the replacement option. After all is said and done, if you don't pay for the monthly protection plan, it could cost you an extra $446 down to $119.

So that's your answer. If you're pretty good at taking care of your gear and you're willing to gamble from $119 up to $446, then don't get the replacement program. But if you'd prefer to risk up to $124 in extra fees on the chance that you'll need a replacement, go that way. Of course, if you've got a much more expensive phone, the numbers change a bit, and the replacement or protection plan you get might be worth more to you.

One final note: your carrier isn't the only one who offers a smartphone protection program. If you go to Amazon, select the Cell Phones & Accessories section, and then type in "protection plan" into the search box, you'll see a whole pile of different plans. At one point, I found a section for "protection plans," but I haven't been able to find it since. The point, though, is that if you search Amazon, you may be able to find a cheaper protection plan. Now, how good is it? Your guess is as good as mine. Read the reviews.

Update: Reader Tony pointed out you might not get the same phone. In fact, the Verizon FAQ states, "Replacement devices may be remanufactured equipment. If the same model is not available, a comparable model will be provided." So, he's right. You might wind up with an S3 instead of the S4 you originally bought. Check out the other comments below. Lots of great advice.

The bottom-line is this: your carrier's replacement program can save you some bucks -- not as many as implied by the sales folks, but some. Do you like to gamble? Well, do ya?

Topic: Mobility


David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

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  • Option C

    Punish yourself for being a klutz and buy a cheaper phone that works with your service. Wife and I already agreed as you save even more money while learning a lesson. Sure, that money spent could be seen as a lesson, but the reality is it is either on auto-pay or accounted for upfront. Thus, when you have your klutz moment, you are not feeling the same impact of a lesser device.

    Why is the tech society during elitist with their personal devices? Your kids breaks his phone, he isn't getting a new high end device until he learns a lesson. Some how adults think they are above learning lessons because we are the "mature" ones with the money. The sad, natural de-evolution of society.
  • Option D

    Keep one of your old iPhone's as your insurance plan.

    If one of the new phones becomes unusable just reactivate an old phone. That's been my strategy for years.
    • Option E

      Usually the screen is broken. I am assuming it is not lost. Then fix it yourself. The $99 deductible plus a few months will pay for most screens. Go to youtube and keyword search le55ons for great how to videos.
  • Option F

    I keep an older phone on hand for this purpose. But there are other options. eBay can get you a used replacement for less than $650. Also, if you break the screen, rather than fixing it yourself (I tried replacing my batter once, and the phone never worked right after that...) you can go to a local shop and have them replace a screen for around $150, or even less.

    The carrier insurance plans have only one real value...convenience. You can buy a 3-year warranty from Square Trade for around $150 up front, and its only downside (other than the $150) is you have to deal with the shipping and delays associated with it. Nowadays, the carrier plans force you through those same hoops after the phone is a year old....
    Jim from Indy
  • Option F

    Buy a used phone of the same model. There's nothing wrong with used phones. Remember the one you lost (or broke) was used.

    All of these options, A-F indicate that the worst choice is to go to a carrier and get a new phone.
  • Damage vs. lost

    I've never lost my cell phone but I have dropped one in the toilet (clean water but water nonetheless). I went to the Apple store, was honest about what happened and they gave me a new phone, gratis, for being honest. Wow. Since then I've bought a Lifeproof case that's dust, shock, and waterproof. Really. So damage is out of the equation for me.

    It is possible to lose a phone but I haven't after starting with the Motorola brick phone 20 years ago so it's well worth the gamble to me.
  • Insurance ripoff

    The insurance associated with T Mobile is a $200 deductible and $12 per month, that is a math no-brainer, don't buy the insurance.
  • Or...

    You could charge your monthly cell phone bill to your Wells Fargo credit card (Auto-pay) and your protection plan would cost you nothing (automatically covered for loss, damage or theft) and WF would cover any phone replacements up to $600.
    • Wells Fargo would weasel out of that

      They're a weaselly business, they would probably raise your APR or somehow make it up if they ever did pay out.
      • shartphone protection plans

        I agree with NotMSUser that Well Fargo would weasel out of paying for a replacement phone, I have only dealt with Wells Fargo but I'm sure it goes for all the major banks that the only thing on their minds is slapping fees or raising interest rates is on their minds. Called WF atlinquire about a line of credit for checking acct. to cover overdrafts, they never heard of such! Cha Ching!
  • Cost of phones drop over time

    This does not take into account the cost of buying a replacement phone should go down over time, and not cost the same as when it first comes out.
  • You forget, they dont give you a NEW phone

    The insurance gives you a sort-of similar replacement, it might be refurbished, it might not be the same model. My Droid3 broke, and for the $99 they sent me a dinky little refurbished Samsung Stratosphere. I called to complain and they informed me they didn't have Droid3s, and they weren't going to send a Droid4. So back it went, I dropped the insurance and got a used Droid3 on Ebay for less than the $99.
    You could end up with a Galaxy S3 for your replacement!
    • Replacement Phone is not new

      I agree with NotMSUser. My family has had to replace three phones. Each time cost $99 and each time we had to return the replacement phone because it was defective. One time, it took three tries to get a functional phone which had a defect in the screen, but it wasn't worth the hassle of returning for a fourth attempt.
  • Option G

    My bank account package includes free mobile phone/tablet insurance for up to 3 or 4 devices. For the first time in 18 years I dropped a phone (2 months into a 24 month contract). All I had to pay was a £50 ($75) deductible and in less than 48 hours got the replacement delivered.

    The one problem with a bigger screen like the Galaxy Note 2 is that the screen is more likely to break. Mine fell out of top pocket when I bent over - first time I have broken a mobile in more than 18 years. Despite hundreds of cracks the touch screen still worked, but started taking the skin off my finger - I always knew there was another use for a stylus!
    • That is why

      You slap a screen protector on it. Even if it cracks, at least the protector is there to keep your finger fine, and assist in holding the screen together (though they are glued on the backside).
  • Apple's option

    This doesn't directly apply to you but I'm amazed at how many Verizon iPhone buyers don't go with Apple's option. $100 for two years of coverage with a $50 deductible. Much smaller cost than the Verizon option.
    • True, but...

      Apple's option does NOT include loss and/or theft, only damage.
      Gary Coleman
  • Asurion sucks

    Do not believe the hype. When you actually file a claim, they "don't have your model". Then they offer as the only replacement an older tech remanufactured handset. Usually some 3G junk you could find in a second hand phone store for $100.

    After that pulled that stunt for the second time, I cancelled all coverage with them and swore to tell everyone I could not to do business with Asurion. You have been warned.
  • I believe that you'll find...

    ... the policy does not allow you to get a lower graded item. So in most cases it must be comparable, or like for like. Instead of the GS4 you might get an HTC One.
    • @Robert-Dowell

      The "Policy" is toilet paper. They did not abide by it and had no inclination to do so even when I begged. They had no sympathy, even when I spoke with a "manager". They had no concern, even when I finally theatened to cancel all insurance with them (2 handsets) and tell everyone I knew not to do business with them. They replaced a new 4G handset with a refurbished 3G samsung and basically told me to live with it. "That is all we have available at this time." - direct quote.

      I repeat, do not do business with Asurion. They are duplicitous and their policy is worthless. As business persons, they are shameful and should feel ashamed.