Should you get month-to-month phone insurance?

Paying an extra $5 to $11 per month for month-to-month phone insurance might sound tempting -- especially now that the big wireless carriers have ditched contracts and subsidized phones, and you're paying upfront for a new iPhone 7.

But it's not that simple. First of all, month-to-month phone insurance isn't the great deal it sounds like -- that relatively low monthly fee is only part of the cost you'll pay if your phone is damaged, lost or stolen. For each claim you file, you'll pay a deductible of $50 to $199 (unless it's an old-school flip phone, assume that price is going to be $199), and most insurance companies only let you file up to two claims per year. Also, if you tend to drop your phone and break the screen -- but nothing else -- insurance may not be worth it because screens can be surprisingly cheap to replace.

So, should you get month-to-month phone insurance? Probably not, but let's take a look at the available plans before we answer that question in more detail.

The plans

There are two ways to get month-to-month phone insurance: You can purchase it from your wireless carrier, in which case you'll simply pay the premium as an add-on to your wireless bill, or you can purchase it directly from a third-party insurance company such as SquareTrade.

The main difference between the two is that carrier-provided insurance usually covers device malfunction, damage, loss and theft, while SquareTrade covers only malfunction and damage. Many carriers, including Verizon and AT&T, offer plans through the third-party insurance company Asurion.

Verizon offers four protection tiers. The top tier, called Total Mobile Protection (TMP), costs $11 per month for one phone or $33 per month for three devices on one account. It protects against device malfunction, damage, loss and theft; and carries a $49 - $199 deductible depending on the device. Verizon's deductibles tend to be a little lower -- most high-end Android phones won't hit the $199 deductible. TMP offers the same protection as the second-highest tier, Total Equipment Coverage (TEC), but TMP includes a tech coach feature, which basically means you can chat with Verizon about your device. You don't need this.

TEC costs $9 per device per month for phones and combines the two lower tiers: Asurion Wireless Phone Protection, which costs $7.15 per month for phones and protects against everything except device malfunction, and Verizon's Wireless Extended Warranty, which costs $3 per month for phones, protects against device malfunction.

AT&T offers two tiers of protection -- the top tier, which costs $10.99 per month per enrolled number (or $29.99 per month for up to three devices), protects against device malfunction, loss, theft and damage. It offers some extra features such as "as soon as next-day replacement," tech support and 50GB of "secure content storage ." The lower tier, which costs $7.99 per month per enrolled number, offers the protection without the fancy features (no next-day replacement, tech support or 50GB of storage for you). Both plans carry a $50, $125 or $199 deductible, depending on the device. Unlike Verizon, however, AT&T rewards you for not filing claims -- you get a deductible discount of between 25 and 50 percent if you haven't filed a claim in the last six months or 12 months.

Sprint offers a two-tiered insurance plan. Tike Verizon and AT&T's, the top tier ($13 per month) simply includes tech support and device tutorials. Sprint's insurance costs $9 to $11 per month, depending on which deductible tier your device is in. There are four deductible tiers: $50, $100, $150 and $200. Most phones will be in the top two deductible tiers and will therefore cost $11 a month. Like Verizon and AT&T, Sprint uses Asurion -- so its plan covers device malfunction, damage, loss and theft.

T-Mobile's insurance costs $10 per device per month and protects against malfunction, damage, loss and theft. The plan includes a $20 to $175 deductible; most high-end phones will end up costing between $150 and $175 to replace. T-Mobile also offers an enhanced protection package for $12 per month that includes Lookout Mobile Security Premium. If you're already enrolled in T-Mobile's JUMP program ($12 a month), which lets you upgrade your phone once you've paid off 50 percent of its cost, insurance is included.

SquareTrade is one of the most popular third-party insurance providers, and it's cheaper than most carrier-provided options. But it also offers less -- you won't be protected against loss or theft. SquareTrade plans are priced yearly: For a current phone, you can expect to pay $89 per year, $149 for two years or $179 for three years. All claims are subject to a $99 deductible. You can save a little (about $10 per phone) if you get a "family plan" covering multiple devices at once. Because the company only covers damage, it will repair your phone -- not replace it. In the event that your phone is damaged beyond repair, SquareTrade will give you money to replace it with a refurbished phone.

Should you get phone insurance or not?

This is a difficult question to answer, because it really depends on you. If you live in an area where phone theft is rampant, or you're the type of person who's likely to lose your phone, carrier-sanctioned phone insurance could save you hundreds of dollars. But if you're just clumsy, you may not come out ahead. Apple will fix an iPhone 6S screen for $99 if it's still under warranty or covered by Apple Care+ -- that's less than a year's worth of Verizon insurance.

Month-to-month phone insurance comes with low premiums, high deductibles and a limit on claims (Asurion lets you make two claims per year, with a cap of $1,500 per claim). If you make one claim per year, you'll pay between $270 and $330 for a new phone -- and the phone may not even be new. The insurance company has the right to choose whether they want to repair your phone or replace it with one of equal value, which means you're likely to get a refurbished phone instead of a brand new one. If your phone is more than a year old, phone insurance makes no sense because older high-end phones are subject to the same deductibles as newer ones.

Device-specific insurance isn't your only option. If you purchased your phone with a credit card, your credit card company may offer an extended warranty that covers device malfunctions once the manufacturer's warranty expires. Also, if you pay your phone bill with a credit card, your credit card company may offer some protection against loss or theft -- my Wells Fargo card offers $600 worth of protection, subject to a $25 deductible, against damage or theft. If you have renter's insurance, your phone is most likely covered in your policy -- though renter's insurance is usually subject to a higher deductible ($500+) per claim.

For most people, month-to-month phone insurance is a bad idea. You're better off extending the manufacturer's warranty or buying Apple Care+.

Editors' note: This How-To article was originally published on December 29, 2014 and was updated on December 26, 2016 to reflect new information.