Here’s Why You Should Skip Smartphone Insurance Plans

February 13, 2017, 9:36 PM UTC
Pile of broken smartphones
Photo credit: Aaron Pressman/Fortune

Verizon enhanced its phone insurance program last week, adding same day repairs in many cities for cracked screens. But consumer advocates say most phone owners would be better off skipping the costly insurance plans offered by Verizon and other carriers.

The problem is that the costs of the equipment protection plans are high, and the benefits of repairing or replacing phones are reduced by deductibles, quality issues, and other loopholes.

Start with the costs. Verizon’s plan starts at $11 per month to cover one phone or $33 a month to cover three devices. That’s $132 or $396 per year before any benefits are received. The plan also has a deductible of $79 per cracked screen repair or $149 for more serious damage or to replace a lost phone. AT&T’s (T) plan starts at $8 per month and charges $89 for a screen repair or $225 for more serious incidents.

But smartphone owners rarely lose or damage their devices, according to surveys by Consumer Reports. Only 15% of respondents suffered serious damage to their phones, and just 2% had a phone lost or stolen.

That may make the extended warranty programs offered by Apple (AAPL) and other phone manufacturers a better deal, although Consumer Reports doesn’t recommend them either.

To start, they’re much cheaper than the carriers’ insurance plans. Apple and Samsung charge $129 per phone for two years of coverage, for example. With AppleCare, Apple’s insurance service for its branded electronics, a phone owner pays just $29 to repair a cracked screen up to two times and $99 for other damage or for repairing a screen more than twice.

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To compare, if an iPhone owner had one cracked screen repaired in two years, the cost from AppleCare would be $158. On Verizon, the cost would be $343.

Furthermore, getting a broken screen fixed by Apple or Samsung doesn’t void the phone’s warranty for more serious damage. But Verizon (VZ) and other carriers outsource to repair firms that aren’t certified by Apple. Get a screen fixed by Asurion, AT&T and Verizon’s third-party repair service, and Apple may not cover the phone for more serious defects later under its free, one-year limited warranty. Asurion says it backs all its repairs and replacement phones with its own one year warranty.

The most valuable feature of the carriers’ insurance plans, however, is a replacement in the case of loss or theft. Replacing a new high-end smartphone costs $650 and up, in addition to any outstanding balance on the lost model. Manufacturers’ extended warranty and service programs don’t cover lost phones, but the carrier insurance plans do–after a deductible.

In the case of Verizon’s equipment protection plan, for example, the cost to replace a lost iPhone is $149. Even with the $264 of monthly premiums over two years, that’s still a big savings from the full cost of a brand new phone.

Then again, the replacement model isn’t likely to be a brand new phone, but rather a used model that’s been refurbished. Some consumers have reported incidents in which replacement phones from Asurion and similar firms didn’t work properly.

The Better Business Bureau gives the company high ratings overall—though 86% of the 2,450 consumer ratings posted on the bureau’s web site are negative.

Instead of carrying insurance, a consumer could buy a used phone on their own from a reputable seller via eBay (EBAY), Gazelle, or similar services in the rare case of a loss. A used iPhone 7 sells for about $500, and the 6S can be had for around $400.

Asurion notes that almost 70% of claims it receives are filed on phones less than a year old, meaning without insurance the consumer is likely on the hook both for paying off the old model and buying a replacement.

“The full cost of cell phones has shifted to consumers, meaning they usually now must pay for the full cost of the phone up-front, or pay the cost in monthly installments as part of their wireless carrier contract,” the company points out in a statement to Fortune.

Consumer can also just revert back to the old iPhone sitting collecting dust in the closet that they retired when they got the new model. “Better to hang on to an old phone in case you need a replacement until you qualify for the next upgrade,” Consumer Reports recommends.

(Update: This story was updated on February 15 with comments from Asurion.)

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