The $23 Billion Problem: When Stupid Things Happen to Smartphones

Where was the last place you lost your smartphone? It turns out most of us lose them at coffee shops or restaurants, according to data from Lookout Mobile Security.

It’s easy to do. One minute you’re sending an email or texting your babysitter, and the next minute you’re mentally retracing every step you made that night—with a huge knot in your stomach.

We can all be a little careless with our phones. In fact, a 2014 study revealed that Americans spent an estimated $23.5 billion on smartphone repair and replacement over the course of seven years.

Maybe that’s why extended warranties appeal to so many people. Too bad they’re such a raw deal. We have a much better idea: Self-insure and pay yourself that money. Here’s why:

Why Extended Warranties Don’t Work

Your phone is your personal assistant—it’s your calendar, computer and communication device. So when it disappears, you need a new one. Fast. Time to call your extended warranty provider:

“Hello, my phone ran away from home. Can I get a new one?”

“Nope. Your contract doesn’t cover lost or stolen phones.”

Wow. That was helpful.

Or maybe you were texting in the bathroom and dropped the phone in the toilet. First of all, gross. Second, time to beg for mercy from your phone insurer:

“Apparently, my phone doesn’t know how to swim. Can I get a new one?”

“Nope. Sorry. Your plan only covers water damage, not immersion.”  

Seriously? Who makes up these rules? The government?

Now, not only do you have to replace your old phone, but you also have to live with the fact that you paid a company for absolutely nothing. Perfect.

How Your Warranty Makes Them Money

When you buy an extended warranty, you’re throwing good money away. Most electronics stores work on such slim margins that extended warranties and financing are their bread and butter. It’s basically pure profit for them.

That’s why you can’t buy phone charger without a sales clerk pushing an insurance policy on you. And even if the extended warranty does happen to cover your particular trouble, you’ll have to pay a pricey deductible on top of what you’ve already paid for the insurance.

Don’t kid yourself into thinking they’re replacing your phone for free. You’ve paid for it.

Related: 5 Smart Ways to Trim Down Your Cell Phone Bill

Easy Tips to Keep Your Phone Safe

You can still protect your smartphone without an extra warranty. Here are five wallet-friendly ways to be a good steward of the money you’ve already spent:

• Install an app to track your phone if it’s ever lost or stolen. These are usually free or cost very little. Try Lookout Mobile Security, Find My iPhone or iHound.
• Do a “phone check” before you get out of taxis, get off airplanes, and leave restaurants. It takes all of two seconds and can save you hundreds of dollars.
• Surprisingly, 25% of smartphone users don’t have a case. It’s the easiest way to prevent cracked screens and broken camera lenses. Buy one!
• Go bright. When you’re buying that case, look for a stand-out color or design. You’re less likely to lose something that’s glaringly obvious.
• If you’ve already damaged or lost your phone and need a replacement, buy used or refurbished. Online stores like Glyde and Swappa are a good place to start. There’s also Amazon, eBay, Craigslist or a simple Facebook post. Just make sure the phone is unlocked and the seller is legit.

The Bottom Line

You don’t need to buy cell phone insurance—ever. You can handle the relatively minor expense of replacing or repairing small electronics without a greedy warranty company holding your hand. And if you can’t, you probably need to reconsider buying it in the first place.

 Do you have the right insurance coverage? You could be saving hundreds! Connect with an insurance pro today!

While you're downloading an app to track your lost phone, do your budget a favor and download our EveryDollar iPhone app too. Learn more about this free budget tool that helps you track your expenses while on the go.