Insurance makes sense on the big things in life, like your house or your health. The cost of fixing either can be astronomical. But the pain of repairing consumer electronics—even pricey ones like a laptop—is still relatively limited.
Extended gadget insurance plans are only worth it for niche cases, like people with an extremely advanced case of klutziness. Insurance programs like AppleCare can also be helpful to those who need always-on-call phone tech support, beyond the great free service Apple offers.
Yet for most of us, here’s a better plan from Richard Thaler, a renowned economist at the University of Chicago Booth School of Business: “Every time someone offers to sell you insurance on a non-large purchase say no, and take that money and put it into a rainy-day account. With any luck, there will be plenty of money in that account the next time you drop your iPhone.”
A few data points nod to the risks. Smartphones that live in back pockets and sweaty palms are perhaps more vulnerable to accidental destruction than TVs and laptops. A repair firm called iCracked that offers an insurance program told me that 20% of customers with an iPhone 6 crack the screen within a year of buying. SquareTrade, another warranty insurance firm, says a third of its mobile phone customers file a claim at some point. A good case would likely reduce your risk, but I’ve not seen any data on the subject.
Consumer Reports, which generally recommends avoiding extended warranty insurance plans, says only 15% of buyers got a new phone because the old one broke, and only 2% because it was lost or stolen, based on a reader survey.
If you do crack your phone, many warranties don’t look like a great deal when you tally the cost of a fix. Any iPhone owner can walk into an Apple store or authorized repair center and have an iPhone 6 screen fixed for $109. You might have to wait, but there’s no extended warranty insurance required.
So, who might actually benefit from an add-on warranty insurance?
- The seriously accident-prone
- Those needing extra help
- Time-sensitive people (Just know what you’re buying isn’t as much a warranty as it is a luxury).