Why Cell phone insurance plans are a horrible idea for the consumer

So you got a shiny new phone and have now been convinced by the Store Clerk to purchase a Cellphone insurance plan.  You do realize they are comped for making that sale.  If not, you do now.  I wlll go on to explain why Cell phone insurance plans are a horrible idea and should only be used for a handful of very expensive phones.

As with everything you need to look at the fine print. I have done some of the research and for this particular blog, I am only going to concentrate on  Apple’s iphones and Sprint’s Insurance plan from Assurion.  Keep in mind the Asurion is the insurance provider for AT&T, Sprint, T-Mobile and Verizon among others.

I was able to get all the information from http://www.phoneclaim.com/documents/Sprint/Sep2014SprintDeductibleSchedule.pdf     This document contains all the deductible information and charges for the plan.  You can go to Asurion,com and try to get the information on other carriers and cellphones.

For Sprint the phones are divided into 5 Tiers each with their own deductible and monthly fee.  http://www.phoneclaim.com/documents/Sprint/Sep2014SprintDeductibleSchedule.pdf

	Deductible	Total Equipment Protection Monthly Charge
Tier 1	$50	$8.00
Tier 2	$100	$8.00
Tier 3	$100	$11.00
Tier 4	$150	$11.00
Tier 5	$200	$11.00

So what iphones fall under which Tier

1) Tier 5  – $200 deductible and $11 Monthy TEP

iPhone 4S 16GB, iPhone 4S 32GB, iPhone 4S 64GB, iPhone 5 16GB,
iPhone 5 32GB, iPhone 5 64GB, iPhone 5S 16GB, iPhone 5S 32GB,
iPhone 5S 64GB, iPhone 5C 32GB, iPhone 6 16GB, iPhone 6 64GB,
iPhone 6 128GB, iPhone 6 Plus 16GB, iPhone 6 Plus 64GB, iPhone 6
Plus 128GB

2) Tier 4 – $150 deductible and $11/month TEP

iPhone 5C 16GB

3) Tier 3 – $100 deductible and $11/month TEP

iPhone 4 8GB, iPhone 4S 8GB, iPhone 5C 8GB

It is interesting to note that the iphone 4s 16gb has a $200 deductible, same as the much more expensive iphone 5 plus  and the the iphone 5c 16gb has a $150 deductible.  Goes to show how unpopular the iphone 5c really was.

Now lets take a few scenarios.  Keep in Mind that the scenarios are for October 2014.  The scenarios change with time

Scenario 1 – I lose my iphone 6 16 gb phone after 2 months – Original Cost is $650.  I can get it replaced for $200 deductible.  My total outlay for the insurance is $11/month for 2 months = $22 + $200 for the deductible  for a total cost of $222.   Worth it as those phones are still expensive and running $650.  Would even be highly recommended if you had the iphone 6 plus 128gb version as that phone runs $949 + tax.

Scenario 2  – I lost my iphone 5s 16 gb after 9 months.  Original Cost of the phone was $650.  I can get it replaced for $200 deductible and I paid $11 for 9 months.  Total paid out for a replacement  is 11×9  + 200 deductible =  $299.   It is not worth it. Why?

Well for one, the phone has depreciated and you can get a used phone  5s on swappa.com for under $300.

Somewhere in the 6 month to 1 year window after the release of the iphone, the insurance plans start getting expensive for the consumer and extremely beneficial for the insurance provider.   Keep in mind that the iphones hold their value very well.  The Android phones do not, they depreciate much faster and their window may not even last the first 6 months.

Things to keep in mind when purchasing Insurance plans

1. Your carrier gets a cut of the monthly fee.  It is a revenue stream for the carrier.  They incent the sales reps into selling them.
2. The person selling it to you is being comped for that sale.  Don’t expect the whole truth from them.   They are just trying to get their commissions.  That is why they are so overzealous in convincing you that you need insurance.  They have quotas to meet.   See bullet 1.
3. If you see an insurance plan added to your  account without your  knowledge and or consent,  now you know why  🙂
4. Once you add the monthly premiums,  the deductible and the depreciation.  It might not be worth it.
5. When you get the phone replaced – they will send you a used phone which may not work perfectly.  They will not send you a new phone but a refurbished phone and it might not be factory refurbished.  The logic used is  – well you lost or destroyed a used phone so we are replacing it with a used phone.  There even has been an instance where Asurion sent a replacement phone that was reported stolen!.
6. When you have to make a claim – the insurance company becomes the bad guy and the carrier  that has been collecting the monthly payment, washes their hands off the issue – leaving you with an extremely bad taste in your mouth.

Your mileage on whether the insurance plans are worth it  will vary.  I would highly recommend you do the math and look for the current replacement prices on swappa.com

Short link to this page http://bit.ly/1wY34vg

Why you should never pay the $36 Sprint Activation fees

Okay so you have decided to go with Sprint and their extremely low priced advertised plans.  You are slowly going to discover that there are plenty of hidden, non-advertised fees.  Sprint is going to get you one way or the other.   Sprint has a lot of “Just Because” fees.  These are fees that Sprint charges just because they feel that they can get away with it.  Us consumers have been trained to pay these “just because fee” by the likes of Airlines, Banks, Hotels, Healthcare providers  and now telecom.   One of the hidden fees is the $36/line activation fee.  Another well thought of fee is a low monthly charge fee of $7.99/line, it is called an Account Spending limit fee (ASL) .  If your bill is low, Sprint charges you a $7.99/line  fee just so you give Sprint the privilege of being your carrier.  I leave it up to you to tell Sprint where they can stick that privilege 🙂

Here is the reason you should never pay and how you can argue against this $36/line activation fee. Keep in mind AT&T and Verizon do charge you when you set up a new line of Service and you should be able to argue that piece away because T-Mobile does not have those hidden charges.  Competition Rocks!!

Sprint is a CDMA carrier unlike AT&T and T-Mobile that are GSM carriers.  With GSM carriers,  to move to a new phone all you need is the SIM card from the old device and move it to the new device and it works.  If the SIM card is a different size you can cut the SIM card yourself using a SIm cutter that you get on ebay for $5.   If the SIM card needs to be larger you can get a SIM adapter on ebay for $1.  You do not have to call your GSM carrier just because you got a new phone.  If you purchased that phone for full price on ebay, amazon or swappa.com  – you do not even have to tell the GSM carrier, the IMEI number of your new phone.  The IMEI number of the phone should really not be shared with anyone for security concerns.

CDMA carriers are  different.  CDMA requires you to call in to the carrier and they will match the phone IMEI number in their database to the phone number that they assign you.

When you call Sprint to activate the phone – they marry  the IMEI number of the handset  to the phone number.  This is inherently a CDMA limitation.  Sprint uses this limitation to their advantage and they charge you a $36 activation fee/line to marry the IMEI with the phone number – something they need to do anyway to give you Sprint’s CDMA service.

My question is why would you pay Sprint for an inherent limitation with their CDMA technology?

Truly Something to think about and Argue against.

Shortlink to this page   http://bit.ly/1nqIFit