Let’s face it: things break. Brake lines, plumbing, computers, kitchen sinks, and the occasional guitar string need to be repaired or replaced from time to time. With anything you buy, there is a period of time you can expect it to last. With mobile phones, that period is usually about two years: with ever-increasing technology and the consumer’s insatiable desire to continually improve it, it doesn’t make sense to design a phone that will survive for millennia to come. Phone makers simply wouldn’t make as big a profit if they weren’t selling so many units.
It is a cycle that feeds on itself. The first step is to get the public addicted to using the service, through one of the major carriers: AT&T, Verizon, Sprint and US Cellular. This is done by having the carrier take a massive initial loss on the phone to get it into the hands of the customer. It shouldn’t surprise me that a phone isn’t free, but I’m always surprised by the customer’s attitude and expectation that they shouldn’t have to pay for it. The carrier will compensate for the loss, and much more, by binding the customer to a one- to two-year contract. This is the reason phone contracts exist: the general public’s ignorance of what a phone is really worth.
Once addicted, the fragility of the technology takes over. Combine that with general apathy and lack of concern for one’s possessions, and cell phones start to break. A lot. This is why carriers offer insurance: a customer is now contracted to the service provider, forced to pay for a service he can’t use because he dropped his phone into a glass of tea (I’ve seen that one). . Insurance seems like a good deal right off the bat, however, I encourage anyone reading this to do some simple math and keep in mind one fundamental fact: the replacement phone you’re getting is NOT a new one.
Yes. But don’t just take my word for it, and definitely don’t ask the sales rep at the store either, as it’s their job to ‘sell’. They will strongly advocate for you to purchase the insurance as they stand to profit from it and as such their opinion is biased. Ask the person on the phone you’ll be ordering the new unit from, and if he’s hesitant to give you an answer, force him to do so. They are required to tell you if it is a ‘new’ or ‘refurbished’ unit, which of course will be the latter.
Carriers now require that you make your decision to add insurance at the time you purchase. When making your decision, add the monthly rate you pay for the insurance, multiply it by the number of months of your contract and add the cost of the deductible that you will have to pay if you replace your phone. You’ll find that the total summarized cost is VERY close, like about 90%, to what you’d pay if you bought a NEW phone outright. And the one they’ll give you is used, and probably untested (and still broken). Add the fact that if you file two claims, the insurance company will drop you. Buying insurance negates the cost of what you saved on the phone when you started, causing your savings to slowly bleed away each month.
I bet you are wondering what happens to your old phone when you return it to the insurance company. This is where they go.
In 2006, a woman approached me with a new replacement phone she had just received from insurance, concerned that she didn’t know how to activate it. I opened the still sealed box, removed the ‘factory plastic’ from the shiny new faceplate, slid in its SIM card, inserted the battery, turned it on and read the message on the screen.
“Insert SIM”