Phone Insurance vs. Self-Insurance: Should You Just Save Instead?

Smartphones can cost $800 to $1,500 today. Protection is a hot topic. Phone insurance is affordable and predictable, but it feels like adding another subscription to a mountain. A lot of people prefer to self-insure by setting aside money for accidents. So what’s really better, phone insurance or self-insurance?

The answer depends on your lifestyle and finances. In this guide, we will go over the pros and cons of phone insurance vs savings, who should use what, and detailed cost comparisons.

What Is Phone Insurance?

Definition of phone insurance

Phone insurance covers unexpected phone repairs and replacements. Carriers, manufacturers, and third-party providers all offer phone insurance options. Insurance is not the same as a phone warranty.

Phone insurance is for eligible claims, such as:

• Accidental damage
• Liquid damage
• Loss
• Theft
• Hardware failures (sometimes)

Costs

Phone insurance is usually purchased through monthly or yearly premiums. As long as you pay the premium, coverage will be active.

Phone owners need to be aware of how deductibles work. The deductible refers to your share of risk, AKA the amount you pay out-of-pocket in case of an incident. For example, if you have a $300 deductible and your phone repair costs $500, you will pay $300 and the insurer will cover $200.

What Is Self-Insurance?

Self insurance is the financial strategy of setting aside savings for a specific purpose. Essentially, it’s a fancy way of saying “emergency savings”. For phone self-insurance, you would probably set aside enough to afford a new phone in case your phone is totally lost. That way you can prevent the scenario where you don’t have enough money to fix or replace your phone.

Creating a phone repair or replacement fund doesn’t need to be all in one go. Instead of paying monthly premiums, you would be adding monthly sums to your emergency phone fund.

Benefits:

• Money is always yours
• Flexible use of funds
• You can choose how much you want to save
• Works for other emergencies

Risks:

• Requires financial discipline
• No immediate protection if savings are low early on
• May not save you money because you’re spending your own

Cost Comparison

It’s easy to say phone insurance offers valuable savings without giving an example. Let’s take a look at an example of how much a phone owner could save or spend using phone insurance or self-insurance for the same phone repair costs. These costs are based on the repair costs of an iPhone 16 Plus.

• Screen breaks: $300
• Battery replacement: $90
• Thief steals your phone, resulting in a full replacement: $900

Phone Insurance

You find a phone insurance plan for $12 a month and decide to buy phone insurance for 2 years. $12/month × 24 months = $288 in two years

Now, factor in a $200 deductible per claim. That means for every incident you file an insurance claim, you would pay $100 of the expenses before insurance kicks in.

For the broken screen, insurance covers $200. You pay $100. For the battery replacement, you pay all $90. For the full replacement, insurance covers $700. You pay $200.

In total, you pay $390 + $288 = $678 with phone insurance

Self-Insurance

You decide to save $15 a month over the course of two years. You end up saving $360 in 2 years, happy that it’s usable for either the phone or other emergencies.

For the broken screen, you pay all $300. For the battery replacement, you pay all $90. For the full replacement, you pay $900.

In total, you pay $300 + $90 + $900 = $1290 without phone insurance

The problem in that case would be, you wouldn’t be able to afford the complete phone replacement with your $360 emergency fund. Even for just the broken screen and battery replacement, you would need to scrounge up an extra $30 to afford them.

If there are expensive claims like when your phone gets stolen, phone insurance is much more worth it. It could easily save you hundreds of dollars. If you go by only savings, you might be completely unable to afford the replacement or repair.

However, if you only need to pay a $300 repair fee throughout the course of your phone’s life, then self-insurance would be cheaper. You wouldn’t need to worry about deductibles or monthly payments.

So what’s the verdict?

Insurance is cheaper if you have numerous repairs or a total loss of your phone.

Saving becomes better if nothing happens, or you only need to do one or two cheap repairs over the years. But it’s impossible to guarantee that no one damages or steals a phone.

In general, insurance is better than using your savings. Realistically, if anything happens to your phone that necessitates a repair in the first place, it is probably expensive enough that it would hurt or exceed your savings. Unless, of course, you have so much in savings that it wouldn’t bother you to overpay for accidents.

Lifestyle & Risk Factors to Consider

Accident-Prone Users

If you’ve broken a phone or other device before, or if you know you have a clumsy streak… it might be safer to just get phone insurance. Insurance costs are like an extra coffee every month. A little annoying, but it’s a predictable number. Premiums don’t change from month to month, so if an accident happens to your phone, you could save hundreds or even over a thousand dollars.

Careful Users

If you’ve broken a phone long ago and decided you will never do it again, and never have? Savings might be more cost effective for you. Even if a phone incident doesn’t happen, it is still valuable to have an increasing fund for emergencies.

The good thing is that financial habits and tactics can be learned and practiced over time. Using savings for emergencies means setting aside a large amount of money that you can’t dip into for fun. If you’re able to remain disciplined, then keeping an emergency fund for repairs and replacements could be good.

Families with Teenagers

If you have one or more children in the family with a phone, insurance can go a long way not only financially, but also emotionally. Phones are expensive yet so essential today, and getting one for your child can mean giving them a great responsibility. If the screen breaks or they accidentally drop it in a swimming pool, that’s a lot of money down the drain. Having insurance would help you afford repairs or a new phone for your child or children. It’s one of those monthly payments that could save you hundreds if not thousands in the long run.

Multi-device insurance exists, and it can be incredibly affordable! Check out our guide specifically for the best phone insurance for families with teens to learn more.

Travelers

If you plan on traveling abroad, phone insurance for travel is crucial. Savings may not be enough because much of those savings are going towards the trip itself. Travel insurance is useful because it covers phone theft and loss abroad, as well as trip cancellations and other risks.

Pros & Cons Breakdown

So we’ve established that phone insurance tends to save you more money if you lose or damage your phone. However, let’s discuss the pros and cons of phone insurance vs self-insurance in other ways, not just monetary savings.

Phone Insurance Pros

Peace of mind: Having insurance means one less financial risk in your life you have to worry about. Paying a small amount every month and you won’t have to worry about needing to replace your phone? Excellent peace of mind.

Theft coverage: We bring our phones with us everywhere, but that means they’re exposed to any thief who crosses our path.

Quick repairs and replacements: Companies like AKKO help you pay for easy and fast same-day repairs. This helps immensely for those who can’t go without their phone for long.

Covers what warranties don’t: Basic warranties that come with smartphones usually only cover mechanical and manufacturer failures. That means the warranty would only cover issues like a malfunctioning screen, not accidental damage.

Customizable plans: Some of the best phone insurance companies in America let you customize your coverage through add-ons and riders. That way you can tailor your coverage, such as if you want to insure multiple devices.

Phone Insurance Cons

Ongoing cost: Even if you choose an annual policy or a plan that has auto-pay, phone insurance is still a persistent cost that is deducted from your funds.

Deductibles: Many phone insurance plans will have a deductible to discourage policyholders from filing claims for the tiniest of expenses. Deductibles are the out-of-pocket expense you need to pay. They can either be per-claim or per-term. Unless you reach the deductible through out-of-pocket expenses, insurance won’t cover the rest.

Fine print exclusions: Insurance policies come with exclusions. You always need to carefully read the policy to see what is excluded from coverage. For example, a phone insurance plan may not cover theft unless you have GPS installed and file a police report. Different insurers have their own exclusions.

Self-Insurance Pros

Cost control: You can choose how much you budget towards phone repairs and other emergencies. You get to dictate how the amount you place in your savings every month.

Flexible funds: You can use your phone repair savings for other reasons. If your car breaks or you’re running low on money for rent, you can take money out of your phone repair fund.

No deductibles: You’ll never have to deal with a deductible or insurance claim process if you simply invest in self-insurance and everything is out-of-pocket.

Self-Insurance Cons

Requires discipline: Maintaining your own savings requires discipline. As the old saying goes, money doesn’t grow from trees. Savings require adding money to a savings account or spreadsheet over time. But it’s tempting to use the savings for something else if you can’t imagine breaking your phone and needing the money for repair or replacement.

Savings need to be ready: You might not necessarily have enough savings to afford a phone accident when you need it. It depends on how much you have in the bank now. People shatter their phone screens within a month of buying their new phone more often than you think.

Hybrid Approach: Best of Both Worlds

There is middle ground between phone insurance and self-insurance. It could make sense for you to insure your family’s new or most expensive phones, and set aside some savings for older or budget devices.

You could also start with insurance, and then move to self-insurance once savings are built. That way there is no gap where you don’t have enough savings for an emergency. Phone insurance companies offer monthly plans that are more convenient and flexible.

Conclusion

Phone insurance is an excellent financial safety net for high-risk users. Self-insurance is a viable option for budget-conscious people who are very careful to not lose or break their devices.

If a phone incident happens, the right phone insurance can save you hundreds of dollars. Assess your risk tolerance, phone value, and financial habits before choosing which option is better for you.

Is phone insurance right for you? Check out our ranked list of best phone insurance companies.