Phone repair vs phone insurance: which saves you more?

When you buy a new phone, the salesperson will offer you insurance. It sounds sensible: pay a small amount each month, and if something goes wrong, you are covered. But is it actually a good deal? We did the maths.

What does phone insurance actually cost?

In New Zealand, phone insurance typically runs between $10 and $20 per month, depending on the phone and the provider. That works out to $120 to $240 per year, or $360 to $720 over 3 years.

On top of the monthly premium, most policies have an excess (the amount you pay when you make a claim). For screen damage, the excess is usually $75 to $150. For total loss or theft, it can be $200 to $350.

The real cost of a claim

Let us say you have paid $15 per month for 18 months and you crack your screen. Here is what you have actually spent:

In this scenario, insurance costs you roughly double what the repair would have cost on its own. And that is for the most common claim: a cracked screen.

When insurance might make sense

• You are accident-prone. If you crack a screen every year, the maths shift in favour of insurance. Two screen repairs in one year would cost $200 to $400 out of pocket, which is close to or more than the insurance cost.
• You are worried about theft or total loss. This is the scenario where insurance has the clearest value. A stolen $1,600 phone is a real financial hit that a repair technician cannot help with.
• Your phone is on a contract and you still owe money on it. If you are paying off a $1,600 phone over 36 months and it gets stolen at month 12, you still owe $1,067. Insurance can cover the remaining balance.

When insurance is not worth it

• You rarely break your phone. Most people go 2 to 3 years between accidental damage events. Paying $15 per month for 3 years ($540) to cover a potential $150 repair is a bad deal by any measure.
• Your phone is older or mid-range. Insurance premiums do not always scale down with the phone's value. Paying $12 per month to insure a $400 phone means you will have paid more in premiums than the phone is worth within 3 years.
• You have the phone paid off. If you own the phone outright, the only risk is repair cost or replacement cost. For most repairs, paying out of pocket is cheaper.
• The excess is high. Some policies have a $200 excess on screen damage. If the independent repair costs $150, you would literally pay more through insurance than going straight to a repairer.

The "self-insurance" approach

Instead of paying $15 per month to an insurance company, put that money in a savings account. After a year, you have $180 sitting there. If you crack your screen, use it to pay for the repair. If you do not crack your screen, you still have the money.

Over 3 years of phone ownership, you would save $540. That is enough to cover two full screen repairs and a battery replacement, with change left over. Most people will never need that much repair work in 3 years.

Check your home and contents insurance first

Before buying separate phone insurance, check your home and contents policy. Many policies cover phones under the "personal effects" or "portable valuables" section, with a lower excess than dedicated phone insurance. You may already be covered and not realise it. The excess is typically $100 to $250, but you are not paying a separate monthly premium.

Related reading: is it worth repairing an old phone? and phone repair scams to watch out for. Compare with our current repair prices.