6 Rip-Off Tip-Offs

Learn who's after your cash -- and how to keep them from getting it.

By Lisa Collier Cool from Reader's Digest | August 2008

2. Cell Phone Replacement Insurance

When Tessa Lewis’s pink Motorola SLVR cell phone broke, she expected Asurion, her insurance carrier, to replace it with an exact duplicate. “They charged a $50 deductible, then sent an ugly, used black flip phone,” says Lewis, 45, a nursing assistant in Lexington, Kentucky. “It wasn’t even close in value to what I had.”

Lewis, who admits she hadn’t read her contract, was even angrier when she realized how much she’d wasted on premiums. “I’d been paying $5 a month for two years. Tack on the deductible, and I was out $170 to cover a $99 phone,” says Lewis. After she found the same pink phone on eBay for $50, she canceled the insurance.

David Wood, a telecommunications expert at consumeraffairs.com, has received numerous complaints about cell phone insurance. “Very few consumers read their policy,” says Wood, “which typically says the phone only has to be ‘comparable.’ It could be a totally different model, so you may have to buy a new headset, charger, and other accessories because the old ones aren’t compatible. Or it may lack the bells and whistles you value, such as a camera or an MP3 player.” What’s more, you’ll usually receive a refurbished phone, not a new one.

In response to consumer complaints, Maryland’s attorney general announced an agreement in April requiring Asurion and the major wireless companies to clearly disclose key provisions in the insurance contract. (Asurion has not replied to Reader’s Digest’s request for a response.)

The best advice: Skip the cell phone insurance unless you have a high-end device like a BlackBerry or Treo or your teens tend to lose their own expensive phones. Most insurance plans give you up to 14 days to enroll after you buy a cell phone, so take the contract home and read it carefully.