SSNHZ Samsung Electronics Company Ltd (PK)

By Nicole Nguyen 

Years ago, my iPhone 7 fell off my nightstand, bounced off a plastic box and landed face down on the hardwood floor.

I picked it up, hoping for the best, but the screen was shattered. Due to an unfortunate mix of physics and karma, the hardest impact was to the bottom, the only part of the device not protected by its Apple-branded leather case. (The latest Apple cases, for iPhone 12, completely cover all four sides. Finally.)

Apple's standard warranty didn't cover the damage, even though the phone was just months-old, because the drop was an accident. The bill for the screen replacement? $140.

Yep, that repair-hit stung. But do I regret passing up AppleCare+, which would have lowered my out-of-pocket cost? Nope.

One cracked screen was enough of a lesson. Since that fateful incident in 2016, I have yet to take in another phone for repair. And I'm not alone: A 2016 Verizon survey of over 1,000 U.S. adults found 49% of respondents had never broken or lost their phone, and 28% had done so once.

If you, like me, are the kind of person who's generally careful with your phone and cover it with a case, then phone-protection plans such as AppleCare+ ($149 for two years) and Samsung Care+ ($216 for two years) don't make sense.

"These are low-probability events by definition. That's why money is being made by Apple and others," said Howard Kunreuther, co-director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania. "People focus on the consequences, and they don't think about the probability."

Chief among the problems, says Prof. Kunreuther, is that phone retailers know the likelihood of phone damage -- at least based on the phones they take in for repair -- but they don't publish that data. We consumers are left to calculate the risk ourselves. And we're bad at it.

When I went to look for research on the topic, most of the so-called studies were published by the companies intent on selling coverage. They often had misleading stats or glaring omissions.

If you got a new phone over the holidays and are considering activating a coverage plan, I can see how it appears to make sense. The warranty included with purchase only covers manufacturing defects, not accidents. And the price of repairs has gone up: A cracked iPhone 6 screen in 2015 cost $109 to fix -- today, the equivalent screen swap on an iPhone 12 costs $279, and $199 on a Samsung Galaxy S21. Other iPhone fixes -- broken camera, malfunctioning mic -- can cost up to $449.

Apple quietly expanded coverage in the fall, making the AppleCare+ program look like more of a deal. Customers now can claim two instances of damage each year, instead of two claims every two years. The Theft and Loss plan (an additional $70 on top of basic AppleCare+) now charges a $149 deductible for stolen or misplaced phones, down from $269.

When you look at individual numbers, it can seem like buying coverage saves you money. Only $29 for an iPhone or Galaxy screen repair! But don't forget to factor in that premium.

There are a lot of numbers to think about, so let's look at a couple of cost scenarios. First, here's what might be of gravest concern for someone who just bought a high-end iPhone:

Broken iPhone 12 Screen

-- $279 - If you don't have coverage and break your iPhone screen.

-- $178 - If you prepay for two years of AppleCare+ and break your screen.

-- $149 - If you bought the plan and don't break your screen.

-- $0 - If you don't have a plan and don't break your screen.

Maybe you aren't prone to breakage but worried about a stolen or lost phone. Here's how that shakes out with Samsung's latest:

Lost Samsung Galaxy S21 Phone

-- $799 - If you don't have coverage and lose your new Galaxy.

-- $541 - If you pay for two years of Samsung Care+ and lose your phone.

-- $312 - If you pay for two years of Samsung Care+ and don't lose the phone.

-- $0 - If you don't have coverage and don't lose your phone.

The most important consideration is probability. Are you willing to bet Apple that you will definitely break your screen? Or bet Samsung that your phone will definitely be misplaced? Sure, someone reading this might skip the coverage plan and regret it later, but statistically that person is in the minority.

Also, your probability of damage goes way down if you slap on a high-quality case made with a non-slick material and raised edges that will protect the display. You could even add a PopSocket or ring for an even more secure grip.

Plus, smartphone displays are getting more durable. Apple says the latest iPhone 12 devices have a display with four times the drop protection. Meanwhile, Samsung claims the S21's Gorilla Glass Victus is the toughest glass on a Samsung smartphone.

You may not even need to consider the coverage-plan bet. Some credit cards offer phone protection as a benefit. Chase Freedom Flex, for example, includes theft or damage insurance for phones, as long as you pay your monthly cellphone bill with your Chase card. The deductible is $50 and you can make two claims a year.

Many homeowners and renters insurance policies don't cover accidental damage, but they do include theft out of the home under personal property coverage. This covers smartphones, although deductibles are often high. My policy's deductible is $1,000 -- well above the cost of an iPhone 12. But if someone stole a backpack that included your phone, laptop and other valuables, you'd be covered. Hippo, a homeowners-insurance startup, and Toggle, the renters-insurance arm of Farmers, lets customers select their deductible when choosing a policy, as low as $500 on Hippo and $100 on Toggle.

When You Should Buy a Plan

The economics might be different if you can't afford to wait for repairs -- Apple and Samsung offer replacement phones as soon as the next day, and some insurance plans through cellular carriers can deliver even the same day.

Otherwise, these extended coverage options are best for big-time klutzes. If you break a phone at least once a year, then sure, sign up. The question is, which plan? You can buy extended coverage from your phone's manufacturer, your cell carrier, or a third party.

Most require you to sign up within a certain period after purchase, 60 days for AppleCare+ and one year for Samsung Care+. Samsung's theft and loss coverage is available only at the time of purchase.

Some companies, such as Progressive and SquareTrade, allow you to register your phone, used or new, at any time with a purchase receipt. And no, if you break your phone, then sign up for the plan, your pre-existing crack isn't covered. (That's insurance fraud.)

Progressive has a relatively affordable deductible for theft and loss: $75, with two-year premiums ranging between $169 and $175, depending on your phone. But there's a caveat: Its coverage doesn't kick in until 30 days after you sign up.

SquareTrade has a flexible $9 monthly fee, with a flat $149 deductible for all damage claims, but no coverage for theft or loss. This could be a good temporary option for, say, travelers.

Cell carriers tend to charge the most. AT&T's phone insurance is $15 a month, more than any of the 10 plans I compared. It does, however, offer impressive perks, including same-day device replacement or repair, up to three claims a year, $29 screen repair, theft-and-loss coverage and unlimited space in AT&T's Photo Storage app. Even if you never use those other perks, at least you know you can actually make use of that photo storage.

No matter what you decide, my main advice is this: Get a case to protect your investment and, even if your phone is marketed as "water resistant, " keep it away from saltwater.

(Dow Jones & Co., publisher of The Wall Street Journal, has a commercial agreement to supply news through Apple services.)

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Write to Nicole Nguyen at nicole.nguyen@wsj.com

(END) Dow Jones Newswires

February 07, 2021 09:14 ET (14:14 GMT)

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