What is cellphone insurance?

You rarely get any warning of where or when you may lose or damage your cellphone. Your phone drops out of a jacket pocket as you rush through a Gautrain station. A moment later, it is gone into the rhythm of moving feet and no one can say exactly where it fell.

Or you leave your phone on a car roof while loading groceries, forgotten for just long enough for the first turn out of the parking lot to seal the mistake.

Then your valuable piece of technology becomes a financial issue, because replacing a smartphone in South Africa is often a big expense, often landing at the worst possible time for your household budget.

This is when cellphone insurance can be valuable. You may be offered it as standalone cover when you buy a phone or it may be bundled into a mobile contract – a safety net for a small monthly fee.

But is it worth insuring your phone?

To answer that question, you need to consider:

• The cover you already have
• What the cover includes and what is not covered
• Whether your household can absorb a sudden replacement cost without strain, delay or debt.
  
  

Is your phone covered under your all risks insurance?

Many consumers already have cover for their cellphones under what is known as all risks insurance, typically included in a household contents insurance policy.

Unlike household contents insurance, which generally protects items inside the home, this type of cover is designed for portable valuables that leave the home, including smartphones, tablets, laptops, watches and jewellery.

However, most insurers require high-value items to be listed or specified in the all risks section of the policy and insured at their correct replacement value. If your phone is not specified, or the insured amount has not been updated since you upgraded your phone, your cover may be incomplete or outdated.

While all risks insurance may include cover for accidental damage, standalone cellphone insurance may provide faster repair or replacement turnaround times for the likes of a cracked screen or liquid damage.

You should bear in mind that claims for the loss of a phone under your all risks cover may also affect your contents insurance.

When your cellphone is insured under a standalone policy, the insurer specialises in insuring phones, which can have benefits when it comes to repairs and replacements and the cover may also be more defined.
 

What are the most common cellphone insurance claims?

Most cellphone insurance claims arise from everyday incidents:

• Screen damage
• Theft or loss
• Liquid damage
• Accidental damage
• Faults after warranty

Screen damage is the most common claim and can result in a repair bill that feels disproportionate to the incident itself.

Theft and loss are also common, largely because smartphones are high-value, portable and constantly in use.

Liquid damage is often underestimated as the internal damage is usually significant.

These risks explain why cellphone insurance is widely sold. Your exposure to them is part of daily life.

What does cellphone insurance typically not cover?

Like most short-term insurance products, cellphone insurance comes with exclusions.

Cellphone insurance generally offers protection against accidental damage and accidental is interpreted narrowly.

Deliberate damage is always excluded. Loss or theft when the phone is left unattended, for example in a vehicle, may also be excluded unless there is proof of forced entry.

Pre-existing damage is not covered and insurers may require proof that the device was functional when the policy started. Any unauthorised repairs can also void cover entirely.

Accessories, such as chargers, earphones and protective cases, are typically excluded, even if lost together with the phone.

Cosmetic damage, such as scratches or dents that do not affect functionality, is also excluded.

Wear and tear, gradual deterioration, battery failure not linked to external damage and software-related issues, such as bugs, viruses, system failures or operating glitches are typically excluded. Manufacturer defects are handled through warranties, not insurance.

Loss of data is also often not covered. Photos, contacts, apps and stored information are not replaced, even if the handset itself is replaced.

In some cases, exclusions also extend to large-scale events such as natural disasters.

Be aware that you may need to explicitly state if you are using your phone primarily for business or commercial purposes.

Is my cellphone insured at replacement or current value?

One of the most important but misunderstood aspects of cellphone insurance is the value of the phone.

Most policies operate on a “new-for-old” basis. This means that if your phone is lost or damaged, the insurer will typically replace it with a similar model available at the time of the claim, rather than paying out what you originally paid.

Generally, insurers replace on a like-for-like basis in terms of specification and function, not necessarily the newest model. If the exact model is no longer available:

• They may replace it with a current equivalent in the same category; or
• Settle in cash based on assessed market value (depending on policy)

The risk emerges when the insured value is incorrect. If your phone is underinsured, insurers may apply proportional settlement. This means the payout is reduced in line with the difference between what you insured it for and what it actually costs to replace.

This is why you need be wary of leaving the insured amount unchanged after upgrades, price changes or device swaps.

Also remember, the insured value should reflect current replacement cost, not the purchase price or depreciated value.

If you do not update the value of your phone regularly, the policy slowly becomes less effective over time.

What excess will I pay on my cellphone insurance claim?

The excess is the amount you pay when you claim, and can determine whether insurance delivers real value when you need to claim.

Fixed excesses can range from a few hundred rand for screen repairs to over R1 000 for theft or total loss, depending on insurer and device value.

Some policies apply percentage-based excesses, typically between five percent and ten percent of the replacement value.

Multiple claims may increase excess levels or result in higher premiums.

How do I submit a cellphone insurance claim?

When something does go wrong, you need to claim quickly and have the right documents.

If your phone has been stolen or lost, the device must first be blacklisted using its International Mobile Equipment Identity (IMEI) number, and the incident must be reported to the South African Police Services within 48 hours even if you are not sure how you lost your phone.

Supporting documents, such as an affidavit setting out the circumstances of the loss, theft or damage, proof of purchase and your identification, are usually required.

Claims must then be submitted within the insurer’s required timeframe, typically within 30 days of the incident.

Claims are typically submitted via online portals, email or by submitting claim forms to the insurer or its appointed claims administrator. The retailer or network provider may assist with initiating the process, but they do not assess or approve claims.

The bottom line

Cellphone insurance is not a necessity for everyone who owns a phone. It is a decision you need to make based on whether you need the liquidity should you need to replace or repair your phone suddenly.

Some households already have some protection through all risks cover if it has been reviewed recently. Others may benefit from standalone cover that adds convenience or faster replacement.

However, whether you have all risks or standalone cover, be sure you are fully covered for the replacement value.

Insurance works when the insured value is correct, you understand the exclusions and the excess is a cost you are willing to carry.

When your screen cracks or your phone disappears, your policy will respond in line with its terms, which should align with the replacement or repair costs you can afford.  

 This article was written by financial journalist Thekiso Anthony Lefifi and reviewed by Natasha Kawulesar, chief client relations officer at Outsurance