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The Pros & Cons Of Cell Phone Insurance

MINNEAPOLIS (WCCO) - Many smartphone owners have trouble keeping their phones safe. They're easy to drop on the ground, plunge into liquid and apparently very easy to steal.

Thefts are on the rise, and it may have something to do with how the device has changed the way many people walk: phones out and eyes down. This can cause all kinds of problems, says Minneapolis Police Inspector Bryan D. Schafer.

"When you have that phone out in the open, you become a target," Schafer said.

In fact, about a third of Minneapolis thefts and robberies now involve cell phones: 1,769 two years ago, 2,437 last year and 1,029 so far this year.

"Would you walk down the sidewalk counting out $500 in cash or $100 in cash?" he said. "You wouldn't do that."

Yet $500 is a little less than the retail price for most smartphones. If you're eligible for an upgrade, you can get a new one by paying a $100 or so. But if not, a lost, stolen or ruined phone is a real problem.

Is it smart to insure your smartphone? University of Minnesota Professor Andy Whitman says no.

"From a finance point of view, it's a ripoff," Whitman said.

Whitman, who teaches insurance and personal finance at the Carlson School of Management, actually lost his iPhone the day before this interview, but he's still firmly against cell phone insurance.

"What's the deductible on your homeowners [insurance]? What's the deductible on you auto insurance? It's probably equal to the value of your iPhone, so you shouldn't have insurance on that," he said.

At $8 to $12 a month, Whitman says it would be smarter to set aside the money, or perhaps invest it.

"I should buy the mutual fund that holds the cell phone company stock," he said.

In fact, one company sells most of the cell phone insurance in the United States. Whether you buy your phone from Sprint, Verizon, AT&T or T-Mobile, you were probably offered Asurion insurance. And 60 million customers think it's a small price to pay for peace of mind.

John Ewoldt covers consumer issues for the Star Tribune.

"There is a deductible, and it's a rather high deductible.," Ewoldt said. "It may be $199."

He says it's important to study the fine print, but insurance is a better deal for the following types of people:

The Klutz - Somebody with a history of cell phone calamities.

Budget Busters - People who just don't want to deal with the full cost of replacement.

People With Pets Or Small Children - They run the risk of having their phones damaged in a variety of unsavory ways.

WCCO's own cell phone klutz, Jamie Yuccas, has made a number of insurance claims.

"I've dropped my phone in the toliet. When I was getting in the car one day, I just threw the phone on the ground and the entire screen cracked," Yuccas said. "I've damaged and had to replace at least four phones in the last year and a half."

Her brother and mother have similar histories, but even after hearing that, our cell phone expert doesn't buy it.

"I actually lost my cell phone in the washing machine," Whitman said. "And I'm not sorry I have never purchased the insurance."

There are some other tricks to consider:

1. Use your old phone until your contract expires and you're in line for a subsidized phone.

2. Get a good case: The best can cost $80 but protect against drops and even some water problems.

3. Check with your homeowners insurance. Some will let you add a rider with zero deductible for far less money.

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