Anyone have any recommendations for smartphone insurance? I was with Trov and made a claim for losing my airpods and was happy with their process, pricing and service. Now with them folding, I need to switch insurers.
Thanks.
Best iPhone Insurance Now That Trov Is Leaving?
Evio on 07/08/2019 - 16:41
Comments
Seems like it would be very hard for an insurer to make money from stand alone personal electronics insurance.
It isn't like it is a catastrophe to lose a phone so everyone would carry insurance to give a diverse risk pool.
If you are careless, your likelihood of claiming is high, if you are careful, then you wouldn't pay for insurance.
Can you get it as part of a phone plan? Or as add on to a home contents policy?
Amex has screen replacement insurance, if that is any use.
Don't bother.
If you can afford to buy a new phone or repair it if you lose/break your original phone, it's cheaper to self-insure. This is because insurance is a pool of risk plus a profit margin on top. On average, you'll end up worse off buying insurance as a result.
Let's say a phone's worth $1k, and 1 in 5 people lose or break theirs every year. This means that the insurer has to collect $1k in premium just to break even, so $200pp. But they also need to cover costs and make a profit (let's say 30%). This means the insurer charges $260pp. Over 5 years, you're likely to claim once, so you get a $1k benefit BUT you've also paid $1300 in premiums, leaving you $300 worse off than if you'd just replaced or repaired the phone when it broke…
This is a helpful generalised explanation of how insurance is priced, but it's not necessarily a good way of looking at it from the single user's perspective. Namely, "over 5 years, you're likely to claim once" should read "over 5 years, the average person is likely to claim once". That's an important distinction.
When buying insurance, there is information asymmetry in that you may know (from personal experience, understanding of your own risk profile etc) that your real rate of losing/breaking your phone might be 1 in 3 years. So the $260 per year on a $1000 phone is a good investment for you (you would price it at $333). The insurer has no way of knowing that, so happily offers you the same price as everyone else.
The improving social understanding that pool risk doesn't reflect your own personal risk is actually a key contributor to rates rising steeply across many insurance products. In this instance, as users who have a good track record of not breaking/losing their phone opt out of the insurance because they increasingly don't see the value, the pool risk increases as low-risk users have dropped out, and therefore premiums rise.
The best insurance is the one you get for free: Time
For instance, after a year, your phone will be worth half or less, after 2 years, half that or less.
New models and a lot of improvements are due, so if you lose yours, the cost of replacement (same model, old or good used) is minimal
Why bother ? lol
Can't you just use your home and contents?