Should you EVER get mobile phone insurance?

FIRST PUBLISHED: 2012

FULLY UPDATED: 2017

It is possibly the most important item we own. So is it worth taking out insurance on your mobile phone? We find out just how expensive and pointless this cover can be…

Iona Bain

Smartphones are so much a part of our lives now that it is unthinkable to be without one. So, of course, it makes sense to take out insurance against losing your life support machine, right?

Erm, hold your horses folks. Having looked into the murky waters of mobile phone insurance, it seems to embody all that is tricky and troublesome about buying a financial product.

Dumb vs smart phones

When I first started writing about mobile insurance six years ago, the cheapest phone insurance policies I could find were £6 a month through 02 and £4.99 at Vodafone. Today, you can still get these low prices – but only if you have a basic old-fashioned “dumb phone”. The likes of the Nokia 8210, which is particularly popular among privacy-conscious celebrities and crooks keen to evade the law, is available on eBay for less than £30 – and may well be the right option for you if you’re a bit over the whole smartphone thang.

This little thing? Cost me £30 and the battery life lasts weeks!

However, thinking about how little this phone costs, it doesn’t really make sense to pay insurance premiums costing as much over five or six months. It is one of those areas where it makes more sense to be your own insurer, take the risk yourself, and pay out if it goes wrong – you will probably be better off than buying a policy which, after a year, will have cost you more than twice as much as the phone itself.

The same surely applies on slightly more expensive phones – perhaps up to £100 or more. But when it comes to smartphones, the risk game changes. Suddenly, the precious object in question is not worth £50 but £600 or even £700. To insure an iPhone 7 will cost you £120 a year at 02 and £144 at Vodafone and EE. So after six months of insurance, you will have paid around £70 – £80 in premiums. Far from covering the cost of the phone, as was the case with the Nokia, this is only around one-sixth of the replacement cost.

What will this whole rigmarole really cost?

So, how much can you expect to pay for mobile insurance bought from high street phone shops? Good luck finding out! The truth is that big phone sellers are very cagey about this area until you’re actually on the shop floor, talking to those oh-so-nice salespeople…

“How can I help you today?” The cast of Channel 4’s PhoneShop (British Comedy Guide)

The websites for 02, Vodafone and Carphone Warehouse are very low-key on insurance. Carphone, which was fined £245,000 by the Financial Services Authority in 2006 for mis-selling insurance, goes through a third party, Geek Squad, and you’ve got to phone these folks up to find out what’s what. 02 also asks you to contact customer services to find out what your handset would cost to insure, or else you get the price confirmed once you’re buying the handset online.

Vodafone Insurance is clearer than most, promising to price your cover at either £8 or £12 a month depending on your handset (or £5 and £7 if you get damage and breakdown cover only). But you’re still playing the Wheel of Fortune because you’ll have to phone up to ask whether you’ll go higher or lower.

Higher or lower? Bruce Forsyth from TV’s Wheel of Fortune (Game Shows Wiki)

I can’t help thinking the reason for all this is that well-known phenomenon – the vulnerable shopper. You can bet your bottom dollar that people who buy in store still get the hard sell on insurance because they’ve been softened up by the big buy. The cost of cover seems so trivial in comparison to the phone itself, and you are already in the buying zone and that much more vulnerable to the old sales patter.

Swerve the hard sell and go online

Go online and you will quickly discover that the likes of insurance2go offering insurance for £70 a year instead. Oh, and Nationwide offers free mobile insurance on handsets worth up to £1000 through its FlexPlus account – this costs £10 a month at the moment, but will go up to £13 in September. Obviously, I wouldn’t advocate switching to this account especially to get this insurance, so this tip only really applies to those who already have it and would be mad to spend extra on phone insurance.

But is it a bit mad to buy phone insurance anyway? At least it’s easier to get an instant price from an online insurer compared to the high street names. But now it’s time to wade into the small print (groan!) and find out whether cover is really worth the candle – or if its reputation for rarely paying out when you do lose your phone is justified.

What do I need to know?

Firstly, bear in mind that you will pay more if you’re covering against loss as well as theft. Some policies won’t even cover you for any scenario except your phone being stolen, so get to know those Ts & Cs people. Also, many mobile policies will only be available to newly minted models – you might struggle to get cover if your phone is over six months old (although the folks at Gadget Cover will help you out up to 18 months after you splashed out).

“What do you mean my phone doesn’t qualify for insurance? It’s only 116 years old”

Don’t forget about the excess either. What is this? The amount you’ll have to pay when the worst does happen. Hmm. I’ve checked out what this could be on some policies and blimey does the excess matter! If you decide to fall back on your home insurance, for example, you could be paying between £100 and £500 per claim, plus you’ll get the no-claims bonus axed, meaning your premiums will go up thereafter. So we can safely forget about that then…

The excess varies on policies sold through the high street – £50 through O2 (not bad) but £100 through EE (er, I think I’ll pass). Looking at insurance2go, the excess is £50, so that’s another tick for the online insurer box (although you can get a lower excess elsewhere if you pay a slightly higher price – Foneguard offers a policy costing £6.74 per month for the iPhone 7 with an excess from £25. You do the math…)

What happens when the s*** hits the fan?

Now, let’s get down to business – what happens when the phone disappears? Typically, theft from a car or is not covered unless the phone has been hidden in a locked (yes, locked) compartment in a fully-locked and security-protected car which has suffered a break-in. Theft from a building is not covered unless there has been a forced entry. The phone cannot be left unattended – not even for a moment (on a table in a pub, for instance) as all “reasonable precautions” have to be taken. Any loss must be reported within 12 hours and a crime incident number obtained. These exclusions are about as good as it gets.

Now, bear in mind that some insurers have an exceptionally harsh definition of what “leaving your phone unattended” means. One case in 2013 involved a woman whose mobile phone was stolen after she went out to a bar with some colleagues. The phone was in her handbag between her legs on the floor, but when she tried to make a claim the next day, she was turned down by her insurer because the phone was “not within her sight at all times and was out of her arm’s-length reach”, an exclusion that wasn’t pointed out when she bought the original policy. She complained to the Financial Ombudsman Service (as you should always do if you have a gripe with a firm and they haven’t resolved it to your satisfaction), and succeeded in getting the claim upheld because the insurer did not draw her attention to this small print.

Bottoms up, phone’s gone…

It just goes to show that if you DO buy insurance, you must be hyper-aware of what the policy covers. If you’re not happy in the event of a claim, go to the FOS. But I’m sorry to say that you might end up being on the wrong side of those pesky exclusions and that ultimately, insurance does not relieve you of the responsibility to look after your phone. Sorry to sound like your Dad there, but it’s true.

Time to do some checking

One thing to check is whether you have unwittingly paid for mobile cover through home insurance or a packaged bank account. Do you need it? Is it the cheapest cover you can get? Are you aware of all the exclusions and do you think they’re fair? And above all, are you actually covered for accidental loss, which is probably the reason why you would shell out for a policy in the first place?

If the answer to any of these questions is “no”, it’s time to think again. Maybe you are paying too much to do your banking or your home insurance policy charges too much and covers too little. Let’s face it, once you are let down in your hour of need (i.e. when you have to claim), that’s when you’ll feel most sore about paying for the privilege of packaged bank accounts or tricksy home cover. Maybe you can keep it simple with a free current account (always my preferred choice) and a home insurance policy that covers the most likely scenarios you face, like accidental loss.

Personally, losing my phone would be an expensive disaster which I am determined to avoid. I have not taken out insurance yet but if I did, I would be taking a chance that whatever mishap occurred would actually be covered by the policy. As it is, I am taking my own risk, and I like to think that makes me that little bit more careful!

For anyone who believes a policy will bring peace of mind, there are the usual three simple rules. Don’t buy insurance at the point of sale of your product. Don’t buy without checking best value online. And do read the terms and conditions extra carefully – or you may find that monthly premium may as well have been stuffed down your nearest drain.