For many of us, our cellphone is our most used device and our most expensive. If you’re paying off your phone as part of a contract with your provider, it makes sense to insure it. But is it worth insuring a phone which you’ve paid off, especially if it’s not the latest and greatest phone?

1. Self-insure if you can 

If you have an emergency fund with enough money in it to cover the cost of a new phone, you’ve effectively self-insured and need not have insurance, no matter what phone you’re using.

But about 60% of us have no emergency savings. Only 38% of households in South Africa say they could cope with an emergency expense of R5,000, according to the latest Old Mutual Savings & Investment Monitor.

2. Add to your contents cover

If you have insurance on the contents of your home, it’s generally cheaper to add your cellphone to your policy than it is to take out stand-alone insurance from your cellphone provider. But less than a third of all South Africans have household cover.

For this reason, most people who insure their phones insure with their service provider. Vodacom and MTN insure new phones only. Typically, you must have purchased the phone within 30 days of the date of applying for insurance.

When you insure your phone with MTN and Vodacom’s insurers, there is no underwriting when you take out the policy. In other words, your premium isn’t determined by your individual risk profile. So if you have had two phones stolen in the past year or have a history of dropping your phone in the toilet, you pay the same premium as someone who hasn’t ever claimed for a stolen or damaged phone.

Your premium is determined by the retail price of the device at the time of inception of the policy.

However, once you have the policy you can be penalised with an additional excess on your second or third claim if these are submitted in a specified time period.

Bevan Collins, the managing partner at Harnacks, says the high cost of repairing new smartphones makes the case for insurance compelling, however the cost of insurance is high.

“Get quotes from your cellphone provider’s insurer and from the insurer of your household contents and compare the excesses and not just the premiums.”

3. Insure at replacement value

Mandy Barrett, the head of marketing and volume sales at Aon South Africa, says you must insure your phone at replacement value. “Insurance is usually based on new for old. You insure for what it would cost to replace the item today. So if your phone is lost, you’ll get a replacement phone or the closest newest model to the model you had.”

It is not advisable to adjust to current market value, she says. “We don’t insure on current value for personal goods. If you were to lose your phone, where would you source a second-hand phone?

“If you’re adequately insured and at replacement value, you’ll get paid out. But if you’re underinsured, the insurer will apply an average.”  If your phone is worth R20,000 and you decide to insure it for R10,000, you’re taking 50% of the risk. However, in the event of a loss, you’ll get 50% of R10,000.

4. Watch out for exclusions

Comprehensive cellphone insurance covers you in the event of accidental damage, theft or loss and typically excludes:

  • Wear and tear, gradual deterioration, scratching or other superficial damage;
  • Any failure of electronic circuitry or batteries and any damage arising from such;
  • Any issues relating to software and any damage arising from software, including malicious software such as electronic viruses;
  • Any loss or damage resulting from carelessness or negligence; and
  • Loss or damage arising from a manufacturer’s defect.

Vodacom’s policy states in bold capital letters that “your claim will not be paid if the Vodacom SIM card listed on the schedule is not in use with the insured device at the time of accidental damage, theft or loss”.

5. Beware of renewals on upgrade

When you upgrade your phone, you’re normally asked if you still want insurance. At that point, it’s worth being emphatic that you want insurance on your “new” phone. This is to ensure that the provider changes their records and that the policy is for the new phone and not the phone you’re replacing.

It would be misleading of your provider to ask you if you “still want insurance” and be referring to the old phone. But it does happen. Trudie Broekmann, a Cape Town-based attorney who specialises in the Consumer Protection Act, says this would be a breach of the law.

Marketing of a product or service must be fair and responsible, and the supplier should correct any misapprehension that you might have as to what phone is being insured.

The costs to insure a new phone

Among the top-selling phones at MTN and Vodacom at the moment are the Huawei Y9 Prime and the Huawei P30 Lite. Comprehensive cover from both providers would cost you R85 a month to insure the Y9 Prime.

Comprehensive cover for the more expensive P30 Lite would cost you R107.94 a month from MTN and R115 a month from Vodacom.

MTN will charge you an excess of R300 in the event of a total loss (if your phone is stolen or not economical to repair) and R150 if the phone is repairable.

Vodacom charges an excess of R450 (if the cover amount is between R5,000 and R7,500) to repair or replace with a “good-as-new-device” or an excess equal to 25% of replacement cost or R250 (whichever is higher) if the phone has to be replaced with a new one. But watch out for extra excesses that apply if you submit a claim in the first six months of the contract.

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