Insurance now available for iPhones, but is it good deal with monthly fee and $199 deductible?

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IPhone insurance now available, but too expensive?

NEW YORK — Absent-minded iPhone users can now insure their devices against loss or accidents. But with a $12 monthly fee and a $199 deductible for the latest model, it might make more sense to just learn to be careful.

Asurion, an insurer of consumer-electronics products, has started a new policy that will cover iPhones that are lost or stolen, or get damaged whether dropped on the ground or into a pitcher of beer. Cracked screens, a common iPhone mishap, will be replaced, even if the phone otherwise works.

It’s the only insurance plan for the iPhone authorized by AT&T Inc., the exclusive wireless carrier in the United States for Apple Inc.’s popular smart phone.

Replacing a phone can be costly. Although the iPhone 4 costs $199 or $299 with a two-year contract with AT&T, customers would need to pay the full retail price of $599 or $699 to replace a phone in the middle of the contract.

Repairs aren’t cheap, either. Tekserve, an Apple retailer and repair shop in New York, charges $149 to replace a cracked screen and $99 for a broken microphone or charging port. (Apple didn’t responded to repeated inquiries on repair service charges at the company’s stores.)

Nonetheless, the value of the new insurance product is questionable.

“These policies aren’t worth it,” said Mike Gikas, senior editor of Consumer Reports magazine. “You are paying more than the phone is actually worth if you lose it later in the contract.”

Gikas said that the best option is to buy a used phone from a website such as eBay, or get an older one from a friend, until the contract is up. He said the overwhelming majority of users do not lose or break their phones, making the premium prices far too high.

Consider this: The plan costs $12 per month, and to get a replacement, a customer must also pay a $199 deductible for the iPhone 4 (The deductible is $50 or $100 less for some older iPhone models).

An insured owner who loses a phone after a year of use would have paid $144 in fees on top of the $199 deductible. That would be a total of $343, about half the price of a new phone. But the chances of losing or breaking a phone are far below 50 percent, making the price for the policy too high for the risk. And according to Asurion, the replacement phone might be a refurbished model.

And what if the owner merely cracks a screen? Based on those figures, it would cost about $200 less to simply repair it at Tekserve.

But Asurion spokesman Tim Stadthaus said the savings over buying a new phone, if lost, makes the policy a good value. He said loss or damage of phones is more common than people think — and the insurance means customers won’t get socked with huge replacement costs.

“There is a high demand for a quick, easy, lower cost way to receive a replacement,” Stadthaus said in an e-mail. “Consumers want the peace of mind of knowing that for loss, theft, damage, plus out-of-warranty failures, they have a comprehensive solution.”

Stadthaus said that with the inclusion of the iPhone, Asurion now covers every mobile phone. The company, which also provides insurance for television and computers, has 90 million customers worldwide for its cell phone coverage.

It’s not clear why it took so long for an authorized iPhone insurance offering, when other phones had been previously covered. AT&T spokeswoman Dawn Benton referred questions to Asurion, which said that only now does it have a sufficient supply of replacement iPhones to provide the service.

Owners of iPhones can sign up within 30 days of activating service, through a free iPhone application provided by Asurion. The app checks to make sure the phone is in working order at the time of registration.

Although Asurion is the only plan authorized by AT&T, independent warranty provider SquareTrade offers coverage for damage from accidents and spills. SquareTrade’s coverage is $99 for two years (compared with $288 for Asurion’s). The company’s deductible is $50, less than Asurion’s $199 for the iPhone 4. But SquareTrade’s extended warranty doesn’t cover lost or theft.

Apple also sells its AppleCare extended warranty program at a one-time cost of $69 for the just-launched iPhone 4. But it doesn’t cover loss or theft either, nor does it kick in for damage from clumsy owners. Apple extended warranty only covers manufacturer’s defects and faulty batteries, for two years from purchase. Apple’s no-cost standard warranty has the same limited scope, but for one year.

Renters or homeowners insurance will often cover the loss of a phone, said Jeff McCollum, spokesman for State Farm Insurance. But the owner will usually have to pay a deductible of $500 to $1,000, offering value only if the loss of the phone is part of a bigger claim, such as after a home burglary or fire.

Keisha Spivey, a 35-year-old office administrator from Brooklyn, said she would consider buying insurance at Asurion’s prices, having had a phone stolen years ago.

“It’s only a couple of dollars more for extra added security,” she said. “Right now if I’m to lose my phone, I’m pretty much on my own.”

Beth Valdez, a veterinarian in San Francisco, also thought the price was reasonable, though she didn’t believe she’d need it herself.

“I’m pretty anal about my phones,” Valdez said. “If I was somebody who thought I’d break my phone, then I probably would” purchase the policy.

Other iPhone enthusiasts, however, thought the policy was overpriced.

Joseph Medina, 35, an assets fund manager in New York, was holding a smashed iPhone in his hand as he stood in line for the new iPhone 4 last week. He had waited for the upgrade and continued to use his phone with its cracked screen for the past month.

“I would never pay 144 dollars a year. It’s a rip-off,” Medina said. “I would prefer to just wait until I can get a brand new phone than pay $12 a month.”

Some iPhone owners worried about adding to the already-hefty bills they get for voice and data services.

“I pay 150 dollars per month. And now they want me to pay another $12?” said Carlos Cortez, a 28-year old bricklayer from Jersey City, N.J. “And I don’t need it. I treat my phone better than I treat my woman.”