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Spending Smart: Working through phone warranty options

McClatchy-Tribune Information Services

October 6, 2014


When it comes to insurance products, extended warranties are the black sheep of the family, regularly derided by consumer advocates as being too expensive for the protection they provide.

Still, there’s an allure, especially for the risk-averse consumer and especially for the gorgeous new smartphones: the iPhone 6, Galaxy S5, et al.

Should you buy an extended warranty for the pricey new computer that you pull out of your pocket dozens of times per day? Do smartphones’ new features and bigger screens change the answer to that question?

Ultimately, the answer will depend on which arguments resonate with you. Here’s what to consider:

Just say no. A simple, blanket answer to the warranty question is to avoid them. Says Consumer Reports: "Pass on phone insurance, which runs about $7 to $11 a month, or up to $264 over two years." It said 1 in 5 respondents in its survey had to replace a lost, broken or stolen phone, "so you probably won’t collect. If you do, you’ll face a deductible of up to $200, and the replacement may be a refurbished model."

So that hangs out the dirty laundry of phone warranties, but it doesn’t address the details and options. For example, some warranties cost less per month and have far lower deductibles. And some might think a 20 percent chance of needing the warranty actually seems pretty high.

Just say no, Part II. The golden rule of insurance is that you don’t insure against little things, just financial disaster.

Credit card coverage. Many credit cards will extend a manufacturer’s warranty for free if the card is used to purchase the device. Some might provide theft protection, and a few provide accidental damage if you use the card to pay your monthly wireless bill. It’s worth checking on the benefits of your cards.

Homeowners. Check to determine whether your existing homeowners or renters insurance covers electronics, or whether you can get a personal articles policy to cover the phone.

Drops and drips. Smartphones are quite reliable, and if you have a defect, you’re likely to discover it quickly, when it’s already covered by the retailer return policy and manufacturer warranty.

That means the value of warranties is mostly about accidental damage, namely cracked screens and water damage, far and away the top accidents with phones.

"They’re reliable until you drop yours in the toilet," said Jessica Hoffman, spokeswoman for SquareTrade, a third-party extended warranty company.

Protect Your Bubble, another warranty company, expects cracked screens to represent 58 percent of 2014 smartphone warranty claims, while water damage is expected to account for 30 percent, with manufacturer malfunctions representing the rest.

Digital life hub. Reaching for your smartphone is already a national addiction and likely to grow as consumers start using phones to pay for items at cash registers. It’s yet another instance when a consumer is pulling the phone out of a pocket or purse and potentially dropping it. And as phones incorporate health-tracking functions, consumers will be exercising more with their phones, which presents damage risk.

"They’re not as durable as your car keys, but we treat them like that," said David Anderson, director of product development for Protect Your Bubble.

Phones are pricey. While you might have paid only $200 or $300 for your phone, its true cost is more like $600 to nearly $1,000, something some consumers learn only when they go to replace a damaged or lost smartphone and they’re still under contract with a plan that subsidizes the cost of the now-broken phone.

Don’t be pressured. It might surprise some buyers that you don’t need to buy a warranty at the exact moment you purchase the phone — although it won’t be covered until you do, and some require a warranty purchase within 30 or 60 days of buying the phone.

Comparing offerings. The primary venues for extended phone warranties are from wireless carriers, third-party warranty companies and retailers that sell phones.

Reviewers generally favor AppleCare+ for iPhones and SquareTrade for many types of electronics.

But few highly rate warranties offered by wireless carriers, such as Verizon Wireless or AT&T. The warranties tend to be expensive, about $10 per month, and have huge deductibles. Both those carriers, for example, charge a $199 deductible per claim. So if you break your phone 12 months after you bought it, you will have paid about $320 to get it replaced or repaired, maybe more than if you had it repaired on your own. Moreover, under some plans, you might get a refurbished phone as a replacement instead of a new one.

But the big plus of wireless carrier plans is that they usually cover loss and theft, while many others do not.

Third-party warranties, from the likes of SquareTrade and Protect Your Bubble, are less expensive than wireless carrier plans, both monthly premiums and deductibles. For example, SquareTrade’s monthly cost for an iPhone 6 is $5 per month or $99 for two years, with a $75 deductible if you make a claim. Protect Your Bubble is about $6 per month with a $50 deductible.

Extended warranties offered by retailers come in widely different types, with some more like the wireless carriers, while others offer the SquareTrade brand.

Pay monthly. One idea if you’re uncertain about making a big upfront commitment to a warranty is to pay monthly to protect your phone when it’s brand new. That way you can insure the phone during the most expensive period of its life — before used ones are widely available for sale, for example. You can cancel the warranty when you feel you don’t need coverage anymore.

Buy replacement phone online. If you’re savvy about phones and online shopping, you can buy a replacement phone on the Internet, potentially cheaper than the cost of warranty premiums plus deductible.

Need for speed. Before you buy a warranty, check details on how you would receive a new phone or get your old one repaired. Some services, such as SquareTrade, offer the option of replacing the phone overnight or going to a repair shop, including an Apple Genius Bar for iPhones, to have the phone fixed, and they will reimburse you.

Bigger screens, bigger trouble? The trend in recent years is toward larger smartphone screens. "We found that screens that are greater than 4 inches are 25 percent more likely to break," Hoffman said.

Bigger screens simply have more surface area to crack, Anderson said.

And as phones get bigger, consumers might be more likely to skip using a case because that makes the phone that much bulkier.

Nearly half of phone users, 48 percent, don’t use a case because it adds bulk when carrying the phone, according to SquareTrade.

Naked phones. Using a phone case, especially the sturdier ones, can mitigate the chances of a break and the need for a warranty — although most won’t help with submersion in water.

In an interesting twist of logic for those averse to phone cases: You could rationalize spending $100 on a two-year warranty because it’s mitigated by the cost of the case you didn’t buy.