July 15, 2016
When you buy a phone, you may unwittingly or unknowingly be getting an phone insurance plan tacked on. Unless you’re a careful reader of your monthly bill, you may not be aware of this. In my case I was repeatedly signed up for – and charged for – monthly phone insurance, even when I didn’t request it or outright declined it.
But, while it’s quixotic to expect that nothing will happen with your phone, life is hectic and accidents happen. If and when you don’t have insurance to cover the costs of repairing or replacing your phone, then you unfortunately have to fork over a lot of cash. So, when I heard about a startup called Protection that was addressing this problem head on, it caught my attention.
Protection is not phone insurance in the legal sense. It’s really a discount buying club that gets you large discounts on smartphone repairs when you need them. The beauty is that you don’t have to pay until you need it. You can sign up any time, even after your device is broken. And you can cancel at any time. And it isn’t tied in any way to your cell phone contract.
I learned in freshman economics not to get insurance if you can afford the loss, which is why I would never pay for smartphone insurance. But in Protection’s case, since you can sign up any time, it’s a savvy deal for the smart consumer.
With Protection, you pay as low as $4.99 per month and the cost of your claim is only half of the repair cost. So, let’s say I drop my phone on vacation and the screen breaks, what do I do? I would simply visit a repair shop nearby, take a photo of my receipt, and Protection will reimburse me half the cost of repair via PayPal or check. On average, an iPhone 6 screen repair can cost $110-140. Unlike the insurance providers, they also allow unlimited claims.
Recently, many carriers have switched to monthly phone plans instead of two-year contracts. It might sound sensible at the time to add an extra $7 to $15 a month for phone insurance to protect your device, but there are still other fees you might have to pay.
Besides worrying about the deductible, anytime you lose or damage your device, replacements can take days to arrive. According to customers who were provided replacements by Asurion—the leading insurance provider for most of the carriers—they received refurbished phones instead of new ones. It’s up to you whether you think getting a refurbished phone as a replacement when you spend $200 on a deductible is worth the price.
AppleCare may be a good deal for Apple users as it avoids the downsides of the insurance plans, but you have to sign up for it within 60 days of getting a new device.
As a startup, Protection is a young company, but unlike with insurance, users are “Protected” because they can sign up and cancel at any time. Might Protection be a way to disrupt the device insurance business?
Disclosure: Protection was started by several students at Michigan State University where I work, although I have no financial interest in the company.
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