This has been mentioned a couple of times around here, usually in the comment section, but I thought I would devote an entire post to the subject. If you are paying for insurance on your cell phone, stop. If you are offered insurance on your phone, decline. Optionally, give the sales person a dirty look for asking. Not too dirty, though, because he’s probably required to ask.

The basic premise behind cell phone insurance is the same for any other insurance on a physical item. You pay a monthly fee and in return, if something happens to your phone, they replace it. Actually, they won’t necessarily replace it. They will replace it with a phone of “equal or greater value.” And you’ll have to pay a deductible that could be more than the cost of replacing the phone on your own.

The problem with the phone of equal or greater value is that you have no control over what kind of phone they will replace it with. Sometimes, without realizing it you chose the specific phone you did for a reason. It felt good in the hand. It had a particular feature or game on it. This is if you’ve got a regular phone. If you have a smartphone, chances are the particulars on the phone (slide-out keyboard or no, operating system, etc) were chosen with some degree of care. The phone you get is anybody’s guess. If you wanted one with a good camera but they decide that a bad camera plus a more storage space (that you would have gotten in the first place if you needed it) means “equal or greater value,” you’re stuck. Even if you actually get a better phone, you can still get burned. Those extra chargers you bought for your previous phone? Incompatible because they switched brands on you or your band changed their proprietary interface.

I had a Nokia phone that I liked just fine until I dropped something on it and it broke. They replaced it with a Motorola. The chargers were incompatible, but more than that I just didn’t like the thing. I can’t even tell you why. My dislike of it was almost immediate. I would not have bought it in the store. But I had no choice. When it died six months later, it was a happy day. Even though most phones come with a 1-year warranty, it apparently doesn’t count if it’s a refurb, which is what you typically get through the insurance policy. I didn’t care, though, because this gave me the ability to buy a phone that I actually wanted. Nokia had upgraded their chargers, though, so I had to buy chargers all over again.

Here is what I should have done: forget the insurance. If my phone breaks, I go out and I buy another one. You can get used cell phones really cheap on eBay. Yeah, it’s used, but so was the phone you broke. If you’re not a smartphone guy, you can get a new phone for less than $30 (no contract), which is less than the $35 deductible. Or you can get the exact same model you had before so everything works.

If you’re buying a more expensive phone, it may be more tempting because you’re going to take a bigger hit if you have to replace it. You’re not going to be able to buy a smartphone for $30. But the more you do on a phone, the more important it is that you have the phone you want. At the bottom end, the difference between one phone and the next is relatively small. Even though I never liked the Motorola phone, it never occurred to me to just junk it and replace it. Give me a smartphone that can’t do what I want it to do or doesn’t have the features I want and I would do just that.

When they give you a new phone, they explain that they don’t have your current model “in stock.” They do this even if your current phone is still being sold by the provider! What I’m relatively sure they do is order a bunch of phones in bulk of one model per price area and simply use that to replace any phones in that price bracket. Economically, it makes sense, but they’re not up front about it and the result is costumers thinking that they’re buying something that they’re not.

My story may be an unusual one, but I don’t think it is. The same thing happened to Web and a couple other people I know. In fact, nobody I know has ever had insurance replace their phone with their phone.

Save the money and simply prepare yourself to take the hit. If your phone breaks, look at it as an opportunity reassess your cell phone needs.