Money Dilemma: A Leather Or Insurance cover – For Your Mobile?

We at INN have said it then, and we say again, money matters are matters of choices. And many a time, it put us in a dilemma; should I do this or should I do that.  Sample this, for instance: should you spend a few hundred rupees (or a few thousands) to buy a fancy leather cover for your expensive smart phone, or should you instead cover that mobile under an insurance policy? Of course, you could say, you want to do both or neither. That’s your call, but if you are one of those who haven’t yet decided, read on.

Leather cover: A physical cover will help your mobile against physical wear and tear, to a certain extent. So, the screen would probably have fewer scratches and  it would save your instrument for exposure to water and like. Of course, a fancy leather cover would also give your cell a trendy look.

Mobile insurance cover: Simply put, insurance is risk management. And if you understand the types of risks your mobile faces, you should perhaps consider buying an insurance cover. Of course, you can also choose to absorb the risk (of damage, loss or theft) by not having insurance for your mobile. Or, you could pass on the risk by buying an insurance cover.

Why: Pankaj Mathpal, Mumbai-based Certified Financial Planner, says: “Buying an insurance cover for a mobile is a good idea, especially if you have a high-end smartphone. Nowadays, people buy cellphones worth Rs 35,000 to Rs45, 000, and getting insurance cover for such expensive devices is good money sense.” Unless, of course, you think nothing of absorbing a risk worth Rs45,000.

So, which of the insurers offer a mobile insurance cover? Not many. Anuj Bhagia, CMO, Policybazaar.com, an online insurance portal, says, “Five or six years ago, there were many players in mobile insurance space. But there were many claims. Establishing the legitimacy of claims became increasingly difficult for insurers; hence many discontinued offering such policies.” Of course, how would the insurance company ever know that your mobile phone was in fact pick-pocketed while you were on a metro?

If you go by a survey done by Symantec, called Norton Mobile survey 2012, nearly 43 percent had experiences of having their mobile phones lost or stolen. This clearly shows that loss and theft is a common risk. Other types of risks that you face with mobile phones is damage due to wear and tear, physical damage, technical damage, software damage and the like. Deepak Yohanan, CEO, myinsuranceclub.com, says: “All mobile phones come with a warranty – of a year or two –  that the mobile company offers. Technical issues, software issues and the like are mostly covered under the warranties.” And these warranties can be extended and cost a few hundred rupees.

As of now, only two insurers, Oriental Insurance Company and The New India Assurance Company offer mobile insurance policies. The Oriental Insurance Company’s policy gives a cover against the risk of fire, theft, terrorist activity, riot and strike.  The policy can be extended to cover the misuse of the instrument. The New India Assurance policy provides cover against, fire, riot, strike, malicious damage and terrorist activities, theft, accident, and fortuitous circumstances.

Bhagia says, “The policy cover comes into effect under a few conditions. But the exclusions are worrisome for me as a consumer.” Take, for instance, the New India Assurance mobile insurance policy, which has the following exclusions as listed on its website.

•    Mysterious disappearance.
•    Theft from unattended vehicles, except from fully enclosed car that is securely locked.
•    Theft, loss or damage during the hire or loan to a third party.
•    Mechanical and electronic breakdown or derangement.
•    Overloading and experimentation involving imposition of any abnormal conditions.
•    Damage by wear and tear, vermin, atmospheric or climatic condition or gradual deterioration, inherent defect or from any process of cleaning, repairing or maintenance.
•    Loss or damage due to war or nuclear perils, loss by water or from any water borne craft.
•    Intentional or wilful act of the insured party.

Also, the compensation that the insurance cover would provide will be a compensation equivalent to the cost of replacement of the instrument by a new instrument of the same specification and same capacity.

In fact, some retailers like Saholic.com have tied up with insurers and offer you an insurance cover when you buy a mobile phone from them.  This cover offers a one-year worldwide theft cover.

In effect, therefore, a couple of insurers and a few retailers offer mobile insurance – and some mobile companies offer extended warranties. In fact, mobile companies are also exploring tie-up with insurers. Just  last week, Nokia tied up with New India Assurance to offer handset insurance.  The plan covers the Nokia handset devices against.

•    Third party threatening to use violence resulting in damage or theft of device
•    Accidental damage to the exterior/interior components.
•    Damage caused by external impact on the device due to dropping and/or other deliberate action by third party.
•    Damage caused by accidental entry of fluid in the device’s internal circuitry.

Theft & Burglary
•    Loss of device through housebreaking.
•    Loss of device riots, strikes and other malicious acts.
•    Theft of device from locked or unattended building, room or vehicle.

On these parameters, it looks like the Nokia-NIA insurance policy offers a better deal than the stand-alone NIA mobile insurance policy.  But then, it’s valid only on Nokia phones.

Things to keep in mind: Mobile phone insurance falls under the general insurance category, which means the cover needs to be renewed every year. In fact, there is a good possibility that your cover would only be valid for 12 months and after they you may not be able to renew the cover.

Premiums: Bhagia says, “The premiums are not very expensive. It could be in the range of Rs 20 per value of Rs 1,000 of sum assured. In fact, the NIA policy has a premium range between Rs 50 to 1.2 percent of the handset value.”

In other words, for a Rs25,000 phone the premium will be in the range of Rs 300 to Rs 500. Of course, on less flashy mobile phone models, you’ll pay a  lower premium.

End note: Whether you want to accessorise your phone or wish to buy an insurance cover is, ultimately, your call. Keep in mind the exclusions before deciding. As far as getting the claim money goes, there isn’t much data available out there.  But if you do buy the insurance cover and the claim gets approved, you can either get the repairs done free, or you will get a replacement piece after taking the depreciation into account. If you are someone who changes their cells every few months, perhaps the insurance cover isn’t a great idea.

Now that you know, do your own research, and decide if you want that funky leather cover or an insurance cover. The truth is that these plans don’t really cover the typical risks your mobile faces.  But, if you don’t mind paying a few hundred rupees for the insurance cover, it’s up to you.

Do let us know any other money related dilemmas you face, so we could help you get better clarity on the issue.