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Top 10 reasons not to insure your cell phone

Picture this: You're about to get a new cell phone when the salesman starts reeling off 101 reasons you should spend the extra $5 a month for insurance.

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Should you protect your investment by purchasing the coverage that promises to replace your phone if lost or stolen? Experts in the wireless industry say no -- you're better off keeping your money in the bank.

If that's true, more than 50 million cell phone users are wasting $4 to $6 per month.

"Cell phone insurance never is a good buy," says Joe Kramer, business director for Phonedog.com, which bills itself as an "unbiased telecom comparison site."  While many consumers think they're acting proactively to avoid shelling out money for new phones, what they don't realize is that there are many reasons it will seldom work out to their advantage. Here's our list of the top 10.

Buy insurance?
Well over 50 million people pay to insure their cell phones.
They think they're protecting their investments, but are they wasting their money?
10 reasons not to
10.The fine print could leave you with nothing.
9.You may have to jump through hoops to collect.
8.The warranty may cover your loss for free.
7.Other insurance may already cover you.
6.A deductible adds to your cost.
5.The phone is just not worth it.
4.You may get apples to replace oranges.
3.You may get lemons to replace oranges.
2.Your peripherals may not fit.
1.You probably won't lose the phone.

10. Exemptions in the fine print could leave you with nothing. Typically, cell phone insurance covers phones that are lost, stolen or accidentally damaged. But don't take it for granted the policy will pay under all circumstances. Some policies have a limit to the number of claims you can file for each year. Verizon Wireless, for example, allows only two claims in any 12-month period. Sprint will not cover damage caused by an attempt to change the phone's color, texture or finish, but it will cover damage from dropping, fire or water. Others will not cover water damage, and Cingular, for example, excludes specific phones, such as the AT&T Wireless branded models and the Nokia 6282.

9. You may have to jump through flaming hoops to collect.  Also often hidden in the fine print are the required steps you'll have to take before your claim will be honored. "You may have to file a police report or you may have to jump a lot of hurdles," says Allan Keiter, president of MyRatePlan.com, a Web site that compares wireless services.

8. The phone's warranty may cover your loss for free. The cell phone insurance you're considering may be totally redundant with the manufacturer's warranty, which often offers the replacement of a malfunctioning phone. Or, the cell phone retailer may have its own replacement policy that is not contingent on insurance.

7. Other insurance may already cover you. If you haven't heard enough yet, consider the fact that you may already be paying for insurance to cover theft or loss through your auto policy or homeowner's or renter's policy. So before buying a specific cell phone policy, make sure you're not covered elsewhere, and figure out what circumstances the insurance won't allow for.

6. There's usually a deductible amount you have to pay first. The monthly fee is not all you should expect to spend if you lose or break your phone. Most cell phone insurance policies require consumers to also fork over a deductible, which generally increases with the cost of the phone. "It can go anywhere from $50 to $150 depending on the original cost of your phone," says Kramer. That means a consumer could end up paying between $170 and $270 to replace that lost or stolen phone insured for two years.

5. Insurance costs more than the phone is worth. Most cell phone service providers offer great phones at deeply discounted prices or even for free when you sign a service contract for two years. So after getting a phone for nothing why would you want to pay $100 or so to insure it? Consider the numbers. If you pay a typical amount of $5 per month for cell phone insurance, you've paid $60 in one year and $120 in two years -- the usual duration of a cell phone contract.

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