Mobile phone insurance - is it worth having?

What's it worth?

Although you may have got your mobile phone for a very low price, that may have been because the price was subsidised by the Service Provider, who makes a profit from the line rental and call charges you pay. A replacement phone, bought without contract subsidy, could cost a great deal more.

If your handset was lost or stolen it could be used to make calls, running you up a considerable bill.

How likely is a claim?

Huge numbers of mobile phones are lost, damaged or stolen every year. They are small, fragile, valuable items that people carry around with them, so this is not surprising!

Unfortunately, some people make fraudulent claims in order to get a new phone. There are even reports of more phones lost than were sold by some suppliers! As a result of high rates of claim, mobile phone insurance seems very expensive in relation to the value of the item insured.

Compare it to a car insurance policy. A car could be worth £20,000 and be at risk of traffic accidents as well as theft, but the premium may be just a few hundred pounds per year. Possibly a fiftieth of the car's value. A mobile phone worth £200 can cost over £50 per year to insure - a quarter of its value.

Phone company insurance

Some new phone contracts come with a warranty and free insurance. For example, Orange offer Orange Care cover. This gives extended warranty and insurance, and offers a replacement handset delivered within 24 hours if yours is defective, damaged, lost or stolen.

Orange Care and insurance from other networks or Service Providers is normally available for a monthly or annual fee where it is not provided for free with the mobile phone contract.

Household insurance

You may find that your mobile phone is covered by household insurance. If so, the cover for the costs of "stolen" calls and the quick and easy handset replacement may not be available, but it can be much cheaper than a separate mobile phone insurance policy.

None?

Another alternative is not to have any phone insurance at all. A typical mobile handset costs around £200 or so to replace without a new contract (or less if you buy a second-hand one). Not something you'd want to pay out, but you may feel that this amount is one you could afford to pay if necessary.

You would have to get a replacement sim for your old number, and buy the new handset unsubsidised, or alternatively "upgrade" to a newer handset if your Service Provider will let you do this. The other alternative is to start again with a new handset on a new account, and give notice on the old one. Less convenient, but cheaper.

Limit the risk with PAYG

If you are concerned that you might have your phone bill run up after losing your phone or suffering a theft, one alternative is to have a Pay As You Go phone instead of a contract one. That way, the thief can only use up the credit, limiting your exposure to risk. Many parents choose PAYG phones for their children, to rule out huge unexpected bills.

It is a matter of balancing the costs and benefits for your situation.

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