If you do, you’re definitely not alone! With as much as phones get dropped, wet, cracked, sat on, or just plain lost, you almost can’t afford NOT to have some type of coverage. There’s nothing more annoying than having a phone that’s not working 100%. And with as much as they’re charging currently for an iPhone, at first glance, it seems almost crazy not to have some sort of protection for your device.
The first time we got my wife her iPhone, we added a coverage plan to her account, and I believe at the time it was only an extra $7 per month. With a deal like that, how could you pass it up?
Lately, however, things are different; a lot different. With my kids getting bigger and more cell phones being added to our family plan, I recently just revised it for 3 phones and was floored by how much Sprint’s Total Equipment Protection (TEP) plan costs currently: $13 per phone!
With 3 phones in my house, that’s an extra $39 per month – just for insurance!
This leaves me wondering:
Is cell phone insurance like Sprint’s TEP something I really need to have? At the rate they are charging, does the cost of the coverage even justify the benefit?
Let’s take a closer look and see if it really makes sense.
What It Really Costs for Sprint’s TEP
For the sake of the following examples, let’s say I took Sprint’s advice and paid for this service every month. At a rate of $13 per month, that’s an extra $13 x 12 = $156 of expense per year per phone.
Because I have three phones to manage, that’s $156 x 3 = $468 per year for this service.
The Hidden Deductible
Now, you could argue that $156 per phone is much less than the cost of paying for a whole new iPhone altogether. Heck, those things pretty much cost $650 brand new.
But there would be one very important detail you’d be missing. Because we have the latest iPhone, even with the most expense TEP plan, there is also a $200 deductible to pay if most circumstances.
So really $156 per year is more like $156 + $200 = $356 if something did in fact go seriously wrong like your phone being lost or stolen.
Not the Same Phone
Again, $356 is still less than the cost of a new $650 iPhone. BUT, again, there’s one more detail we’re falsing assuming …
Suppose something tragic really did happen to one of our new iPhones. Will Sprint be giving us a brand-new, out of the box device to replace the one we paid for coverage on?
Unfortunately, NO! As it turns out, if you read the fine print, Sprint actually has the option to give you a “refurbished phone”.
That’s right – you’ll be getting a used phone that was more than likely repaired by Sprint after someone else might have busted it (not to mention who knows where it’s been).
Where the Costs Out-Weigh the Benefit
So to sum this all up, let’s put things into perspective: There’s the expensive cost of the TEP service, the high deductible on top of that, and the fact that you might get a lower quality, refurbished phone in place of your new one.
Now consider that you can buy a used cell phone online for less than $356. In fact, Sprint themselves was selling refurbished iPhone 5s’s for $300.
So literally it would be cheaper to simply buy the older model phone at $300 than to have TEP for one year and have to pay the deductible ($356).
Let’s make this even more interesting. Fast forward to the end of two years. Now you’ve paid $156 x 2 = $312 for Sprint TEP plus a hypothetical $200 deductible if something had happened. That’s a total of $512. That’s just $138 shy of the cost of the latest and greatest NEW $650 iPhone.
When you multiply everything we just talked about times 3 phones, the analysis really starts to make no sense.
Let’s pretend at the end of the first year that something awful happened to all three of my phones. I would then have paid $156 x 3 = $468 for one year of TEP service and $200 x 3 = $600 in deductibles. That’s $1,068 altogether.
After two years, that’s $936 in TEP and $600 in deductibles for a total of $1,536. Again, I almost could have bought three of the latest iPhones at that rate.
Don’t Forget About Depreciation
We haven’t even mentioned the fact that after two years, your phone is basically worthless. If you don’t think so, just ask your cell phone provider what the trade in value is. You’ll get a good laugh.
For most people, two years marks the end of when they are done making payments on the device. So what then is the benefit of equipment protection at that point? You’d be throwing away money each month that you either could have saved or used to buy yourself a new device.
To continue your insurance coverage would be like having full-coverage auto insurance on your 1998 Saturn – it just wouldn’t make any sense.
After pouring through the numbers, I think you can see that under these conditions, I’m just not seeing how Sprint’s Total Equipment Protection service is worth the money. According to CNET, PC magazine, and Policy Genius, I may not be alone in my reasoning that this is some kind of a rip-off.
Even we give the cell phone carriers the benefit of the doubt and take a middle-of-the-road approach, let’s suppose one of the three phones develops a problem within the next two years. I could easily purchase a previous model phone for around $300 and resolve the issue until a time when it is appropriate to new our services. That would have saved me $936 in actual TEP costs and a potential $200 deductible; $1,136 in total savings.
I should mention that when we revised our plan, I actually tried to have the three lines of $13 TEP coverage removed. However, I was told by the Sprint representative that with revised service this was coverage was mandatory for the first month. So right out of the gate, we’re off to a bad start. I would imagine that, by default, Sprint probably does this because there is a very high likelihood that most people will simply “forget” about this expense, not bother to remove it, and just go on obviously paying the extra fees.
At a minimum if you really feel strongly about having some sort of insurance or equipment coverage on your device, then the only way I could see this making any sort of sense would be to have it for the first year only when your phone is at its maximum value. From the second year on, much like a car, the phone has lost over half of its value and is no longer worth the $356 in potential annual cost if you needed to have it replaced.
In fairness to Sprint, they do offer other versions of this coverage at a reduced rate (although as I understand it, your deductible increases for most of them).
Keep in mind, too, that you don’t necessarily have to always go with just your cell phone service provider for insurance or coverage. There are many affordable alternatives you could consider. Lifehacker has a pretty good list.
Just be sure to read the fine print on any insurance plan before you place an order. Some of them do not cover things that you would expect to be covered such as theft or water damage. What can I say … it’s insurance – there always seems to be a catch!
Featured image courtesy of Flickr