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State laws require sellers of portable electronics insurance to disclose that it may duplicate coverage you already have through homeowners or renters insurance.
Buying phone insurance is not required to buy or lease a phone, and customers may cancel at any time for a refund of unearned premium.
The FTC says putting money aside in a savings account can be a better option than an extended warranty.
At the checkout counter or on the carrier’s website, you are likely to be offered some kind of protection for a new phone. The names vary: insurance, protection plan, extended warranty, service contract. They are not all the same thing, and some may duplicate coverage you already have.
Three different products
| Product | What it usually covers | Who regulates it |
|---|---|---|
| Manufacturer’s warranty | Defects in materials and workmanship for a set period; usually not drops or water | Federal warranty law, enforced by the FTC |
| Extended warranty or service contract | Repairs beyond, or alongside, the maker’s warranty; sometimes accidental damage | FTC consumer protection; some states also regulate service contracts |
| Phone (portable electronics) insurance | Loss, theft and damage, subject to a deductible | State insurance regulators |
The FTC is clear that an extended warranty or service contract is not a warranty: it costs extra, is sold separately and may cover the same repairs, for the same time, as the warranty that came with the product.
What state law makes sellers tell you
Phone insurance sold at a store or by a carrier is usually a group policy issued to the seller, which customers can join. Many states regulate it with special laws. Maine, South Dakota and Oregon, for example, require brochures or written materials wherever this insurance is offered, and they spell out what the materials must say:
- The insurance may duplicate coverage you already have through a homeowners policy, renters policy or another source.
- You do not have to buy the insurance to buy or lease the phone or service.
- The amount of any deductible and how it must be paid.
- Whether a covered phone may be replaced with a similar make and model, or repaired with reconditioned or non-original parts.
- How to file a claim, including any requirement to return the damaged phone and the maximum fee if you do not.
- That you may cancel at any time and get a refund of unearned premium. Oregon allows a reasonable administrative fee of up to 10 percent of the refund.
Oregon also requires a seller to hold a limited license from its Division of Financial Regulation before offering this insurance. If you are not given these disclosures, ask for them.
Tip: Check your homeowners or renters policy before buying phone insurance. As state law requires sellers to point out, you may already have some coverage for theft or loss. Compare that policy’s deductible with the phone plan’s.
The FTC’s checklist for service contracts
For extended warranties and service contracts, the FTC suggests finding out:
- Costs: the price, plus hidden costs such as deductibles or fees each time the product is serviced, shipping costs and any fee to transfer the contract.
- Reputation: who is actually responsible for the coverage, which may not be the manufacturer, and how long that company has been in business.
- Length: use the length and price to calculate the monthly or yearly cost.
- Coverage: does it cover accidental damage? Only certain parts? If something is not listed, assume it is not covered.
- Claims: how to file, who does repairs, how long reimbursement takes.
The FTC adds that a contract is not a good value if it offers no more coverage than the warranty that came with the product.
Watch for “replaced with a similar model”
Phone insurance often replaces a lost or broken phone with a similar make and model, possibly reconditioned, rather than a brand-new one of your exact model. State disclosure laws require sellers to say so. If you care about getting the same model and condition, read that part of the terms carefully.
Beware of warranty telemarketers
The FTC warns about calls and mail offering extended warranties, sometimes years after you bought something, from companies with no connection to the seller. It says those telemarketing calls are probably illegal if you have no connection with the caller, that the marketers often use high-pressure lines such as “your warranty is about to expire,” and that buying from them is risky because the company may not exist when you need it.
The do-it-yourself option
The FTC notes that putting money aside in a savings account can be a better option than an extended warranty: if you need a repair, you pay from the account, and if you never do, the money is still yours. For a careful owner with a good case and a screen protector, a repair fund often beats a monthly premium. For someone who drops phones regularly, or who could not afford to replace one on short notice, insurance may be worth it.
Questions to settle before you buy
- What is the monthly cost, and what is it over the time you expect to keep the phone?
- What is the deductible for a cracked screen, a damaged phone and a lost or stolen one?
- How many claims are allowed in a year?
- Will you get a new phone, a reconditioned one or a repair?
- What does your homeowners or renters policy already cover?
- How do you cancel, and what refund do you get?
The bottom line
A maker’s warranty covers defects; insurance covers loss and damage; a service contract can sit anywhere in between. Read the required disclosures, check for coverage you already have, do the math over the life of the phone and consider whether a repair fund would serve you better. For cracked screens in particular, see Fixing a Cracked Phone Screen: Repair Options and Costs to Weigh.