Buying phone insurance might give you peace of mind but it is not always the best financial option. Picture: Thinkstock. Source: ThinkStock

So when it comes to replacement it can be an expensive process with many smartphones often costing upwards of $1000.

Telco giant Optus says for the 12 months until March they had more than 118,000 insurance claims by customers and a majority of them was caused by physical damage (75 per cent).

Another 20 per cent of claims were reported as lost and five per cent were stolen.

The high volume of claims has forced the telco to ditch convoluted insurance policies and roll them into one product costing customers $13 per month to cover phones if it’s damaged, lost or stolen.

Optus’s mobile marketing vice president Ben White says consumers often get a phone warranty confused with insurance, but the latter ultimately gives them “peace of mind.”

“Warranties can give 12 months for things that can go wrong that are the manufacturer’s fault but there are lots more things that can go wrong,’’ he said.

“In the physical damage category the two biggest things would be broken screens or damage from when a phone that is dropped and when a phone goes into the water.”

Customers still have to fork out an excess charge if they make a claim on their policy which is $50 for accidentally damaged devices and $150 for lost or stolen devices.

White says there’s no limit to have many claims customers can make.

Optus had 118,000 insurance claims by customers in a year. Three quarters were due to physical damage. Source: Supplied

But comparison website WhistleOut’s editor Joseph Hanlon says signing up to insurance isn’t always the most cost-effective approach.

“I wouldn’t automatically recommend insurance, especially for anyone on a tight budget,’’ he says.

“The cost of phone insurance in Australia effectively doubles the handset repayment costs for most Aussies who buy a new phone on a plan, adding about $300 to the cost of a new phone over 24 months.”

Hanlon suggests users who end up with a smashed smartphone screen, as an example, to look at the cheaper option of getting a screen repayment and also to check whether phone damage is covered in the home and contents insurance policy.

Telstra’s executive director of mobile customers John Chambers says he had seen high demand for the company’s Stay Connected product ($13 per month) which allows subscribers to replace their devices up to twice a year.

“The uptake (of Stay Connected) is about one in two smartphone contracted users,’’ he says.

“Most people have had the experience themselves or someone close to them (of a damaged, lost or stolen phone) ... it’s not just a breakage or loss but it’s the protection of what’s on the phone.”

When a customer purchases the service they are prompted to download an app that helps store all the information on the user’s device including photos and contacts.

MoneysaverHQ’s deputy editor Sophie Elsworth says her phone has a habit of trying to swim. Here’s her argument for getting phone insurance. Picture: Nathan Dyer Source: News Corp Australia

The argument FOR phone insurance

MY mobile phones have a habit of trying to swim.

Freestyle, backstroke, sidestroke or even a belly flop, too many times they’ve ended up in a pool of water.

So for those people who whinge on a Monday morning about losing their mobile phone while out drunk, or those who dropped it in the toilet bowl while trying to text, talk or goodness knows what, my sympathy levels are pretty low.

To buy a new iPhone outright you’ll need at least $1000 depending on which fancy model you opt for, so why on earth wouldn’t you pay a measly amount each month to have it insured?

I think I pay about $13 a month and it’s been worth it multiple times over.

In the past couple of years I was left with a waterlogged phone thanks to the pouring Brisbane rain. My precious phone fell into a giant pool of water courtesy of a typical Queensland afternoon summer downfall and my phone slipped out of my hands.

I tried the trick we all know, the good old hairdryer but nothing was going to salvage this little baby.

And the second time around I had the new iPhone 5S that was sitting in the bottom of my handbag and thanks to a drink bottle lid that was clumsily left loosely on, the phone had a lovely little soak in water.

When I realised it was too late.

The $100 insurance excess charge to end up with a brand spanking phone has been well worth it.

So if you’ve going to go without insurance don’t whinge when something unexpected happens to your previous little device.

Insurance is NOT the answer to everyone’s troubles, says MoneysaverHQ editor Emma Blake. Source: News Corp Australia

The argument AGAINST phone insurance

Insurance is not the answer to everyone’s troubles.

We have such a disposable, easy come, easy go attitude to everything that many people blindly pay through the nose for insurance rather than look after their belongings.

Perhaps if they didn’t have the costly insurance to fall back on they would be more careful with their phone in the first place. Perhaps they feel, since they are paying for the insurance, they need to get something for it.

But even if you are insured you often still have to pay an excess to replace a handset.

For me, insurance is not an option.

I’d rather take that $300 or so a year and put it in a savings account, in my name, and earn interest, for me, rather than pour cash into the pockets of insurance company shareholders.

Should something go wrong with the phone, I still have the money to repair it or have it replaced. If nothing goes wrong, the money is mine to spend as I please.

It is interesting that, of the 118,000 insurance claims Optus received last year, 75 per cent were due to physical damage.

Instead of spending $11 or $13 a month for insurance — on top of the $50 or more you’re paying for your plan — why not spend $20 or $30 on a decent cover and screen protector. There’s not much you can do about water damage except avoiding using the phone in wet places — like the bathroom — nobody wants to hear from you while you’re there anyway!

I have never paid phone insurance and have never had to worry about phone damage, despite having three busy young children who buzz around my phone like bees around a honey pot.

The simple answer is: take care of your phone and keep some money squirrelled away in case the worst happens — or pay for a new one if it does and then reconsider your options.

I am happy to have saved thousands by not paying phone insurance over the years. Maybe one day I won’t be so lucky, but that’s a risk I am happy to take.