That new cellphone may not last until the end of your contract. "Our latest estimate is that 1 in 3 smartphones will break in a two-year period," says Shay.
Smartphones are typically subsidized through the carrier's two-year service contract. If the phone breaks before two years, consumers are "stuck paying for a repair or replacing it themselves," at upward of $649 for a new phone, says Shay.
Make sure you understand the coverage, though. For example, AppleCare+ covers just two incidents of accidental damage during the coverage period, with each claim subject to a $79 service fee. According to a 2012 SquareTrade survey, 17 percent of iPhone owners damaged their phones more than once during the previous year.
Find out what it would cost to repair or replace your smartphone under the extended warranty. You're likely looking at a deductible of $99 to $199, depending on the model and plan.
Check your cellphone plan, too. Mark Nachlis, a parent of three in San Mateo, Calif., says he stopped buying cellphone warranties because he could usually get an inexpensive replacement phone through his family plan -- someone is usually eligible for an upgrade.