Understanding the Difference Between Warranty and Insurance

You may have heard a lot of talk about Apple and AT&T’s stance on insurance coverage for the iPhone (their stance being that they don't offer it). As unfortunate as that may be for those with a displayed tendency for damaging their cell phones, there are alternatives to explore.

Both AT&T and Apple will remind you that even though they don't offer insurance for the iPhone, extended warranties are available. The iPhone comes with a free one-year warranty that can be extended to two for an extra $69. It’s important to differentiate between a warranty and insurance, especially when investing in a gadget as costly as an iPhone.

Warranty Coverage

By definition, a warranty is a contract that promises complementary replacement or repair if the covered product stops working properly as a result of poor workmanship or a flaw in the design. The coverage expires after a set amount of time and anything that occurs after that is up to you to pay for.

Insurance Coverage

Insurance is what you pay for to make sure you’re covered in the event of unforeseen circumstances such as accidental damage, loss, or theft. One of the biggest dilemmas facing iPhone customers is the high cost of replacing the phone in the event of any of the above situations.

The AppleCare Protection Plan, Dissected

Each iPhone comes with a one-year warranty that guarantees you coverage against hardware or software failures. This means that if you buy an iPhone and discover that something’s not quite working the way it ought to be, you can have it repaired or replaced at no cost. With coverage like that, why is Apple pushing their AppleCare Protection Plan for an extra $69?

Extended Coverage

The AppleCare Protection Plan extends the length of your hardware and software warranty to two years instead of one. Not only does this allow those who are well-acquainted with Murphy's Law to rest easy for an additional 12 months, it also covers premature battery depletion for that length of time.

Phone Support

The iPhone comes with complementary phone support for the first 90 days after it’s purchased. After that, it’s no longer free. The AppleCare Protection Plan extends this period of time to a full two years.

Caveat

Although you may be offered the AppleCare Protection Plan before you’ve even started filling out the paperwork for the phone, you can take your time to think it over and weigh your options. The additional coverage can be purchased at any time within your first year of warranty coverage. After that, it’s no longer available to you.

The Skinny on Best Buys Black Tie Protection Plan

Best Buy offers electronic equipment insurance plans designed to keep the customer from having to shop around for third-party coverage. The Geek Squad Black Tie Protection Plan isn't limited to iPhones—the plan also offers PDA insurance, computer insurance, and camera insurance.

The Cost

Best Buy’s Black Tie Protection for iPhone is contingent upon subscription to AT&T service and costs $14.99 per month, which translates to $180 per year.

The Coverage

Normal wear and tear: This includes wear caused by excessive dust, heat, or humidity.

Accidental damage caused by handling: In other words, drop protection for the fumble-fingered.

Battery replacement: You're covered if your iPhone's battery begins to fail prematurely.

Damage caused by power surges.

No-Lemon Policy

Any iPhone that requires four or more repairs is considered a lemon and is replaced free of charge as long as you’re enrolled in the monthly protection plan.

Buying iPhone Insurance - Exploring the Options

The lack of iPhone coverage alternatives provided by Apple and AT&T have led many consumers to pursue other options.

Homeowners/Renters/Personal Insurance

Many insurance companies will allow you to add coverage for expensive items like your iPhone under personal property insurance, homeowners insurance, or renters insurance. The good: coverage is cheap, ranging from $5 to $20 a year. The bad: You can’t just buy standalone iPhone insurance—you have to add it to an existing homeowners, renters, or personal insurance plan. The ugly: Even a small claim could raise your rates or jeopardize your coverage.

Credit Card Insurance

Many credit cards offer “purchase protection plans” for expensive merchandise. This typically covers you for damage or theft within the first 90 days and only covers “eligible items” and those over a specific dollar amount (for example, if your $75 iPod gets stolen after two weeks, you’re out of luck, but if you damage your $600 iPhone within the first 90 days, you’re in the clear). Still other credit cards offer warranty extension plans.

Third-Party Coverage

There are third-party companies, such as Safeware Insurance, that specialize in electronic equipment insurance for items like your iPhone. Coverage prices tend to be reasonable, with the average costing a yearly fee of 10% of the iPhone’s value.

Subsidized vs. Unsubsidized - The Pros and Cons

The good news for consumers who want to get their hands on the iPhone without having to re-sign a new two-year contract with AT&T is that the phone can be purchased without a contract; however, this option is much more expensive.

Subsidized

New or existing AT&T customers can purchase the iPhone at a lower price. This lower price is known as the "subsidized price." The subsidized iPhone prices are meant to draw in new customers and to encourage existing customers to re-sign their contracts. Each purchase of a subsidized iPhone requires the customer to sign a two-year contract with AT&T. Depending on the type of iPhone you get, subsidized prices range from $79.99 to $299.99.

New customers automatically qualify for the fully subsidized price, while existing AT&T customers' eligibility depends on the status of their current contract. If an existing AT&T customer isn't eligible for the lowest price, he or she may be eligible for the "early upgrade price" ($399 and $499, depending on model). To eliminate any unwelcome surprises, it's best to contact AT&T before purchasing your iPhone to find out what you'll have to pay.

Unsubsidized

Existing AT&T customers who aren’t interested in committing to another two years have the option of buying an iPhone at the full price. This is known as the "unsubsidized price." At $599 for an 16GB iPhone and $699 for a 32GB iPhone, the cost of an unsubsidized iPhone is substantial; this high cost makes a great argument for seeking third-party insurance.

Also, remember that loss and theft aren't covered by AppleCare. If your iPhone isn't covered by a third-party insurance plan and is lost or stolen, you'll have to pay either the full unsubsidized price or the early upgrade price for a replacement.

The Issue of “Unlockability”

Phones purchased without a contract still require activation with AT&T in order to function. To get around this requirement, some people opt to "unlock" or hack the phone to make it usable with another carrier. Unlocking the iPhone voids its manufacturer's warranty (and most third-party insurance plans), which means that, should something happen to it, the user would be out of luck.

Jailbreaking and Unlocking Explained

"Jailbreaking" and "unlocking" are two terms that are commonly used to describe the act of hacking into your iPhone to allow it to perform functions outside of its intended use.

Jailbreaking

When you jailbreak your iPhone, you essentially unlock its internal software restrictions. This allows you to install third-party programs on your phone without going through the iTunes App Store. An unlocked phone can also send and receive files independently of iTunes.

Unlocking

When an iPhone is unlocked, the SIM card can be replaced with any other GSM-compatible cards. This allows users with a fondness for Apple products but a distaste for AT&T services to use their iPhones with another carrier.

Revirginizing

Jailbreaking and unlocking both immediately void your manufacturers' warranty; however, it is possible to restore your iPhone to its factory settings. This process is known as "revirginizing."

A Question of Legality

While hacking an iPhone isn't illegal, it's not wise, especially if you want to keep your warranty (or third-party insurance coverage, as most companies don't cover unlocked phones). In some areas of the world—like Hong Kong—the iPhone is available unlocked. This has yet to happen in the United States.

Comparing Third-Party Insurance Plans

For an item as expensive as the iPhone, buying insurance that covers you against unforeseen circumstances is just plain smart. Unfortunately, you can’t get insurance coverage from either of the two companies you’d expect to offer it: Apple and AT&T. The upside is that there are online insurance companies out there that will insure your iPhone relatively inexpensively.

Go Gadget Guard (www.gogadgetguard.com)

There are two levels of protection available from Go Gadget Guard.

• Silver Service Plan: $3 per month after a $29 activation fee. Can be added within nine months of the original purchase date. Offers two years of hardware protection and battery replacement, but doesn’t cover accidental damage, loss, or theft.
• Gold Service Plan: $5 per month after a $49 activation fee. Available only within the first 30 days of purchase. Offers accidental damage coverage (including water damage). Loss or theft is not covered.

Safeware (www.insuremyiphone.com)

Coverage starts at $79 per year and can be purchased at any time. Safeware’s comprehensive coverage insures you against accidental damage, liquid spills, loss, and theft. The deductible for each claim is $50 and there is no limit on the number of replacements.

SquareTrade (www.squaretrade.com)

Coverage starts at $96 for a two-year term and must be added within 30 days of purchase. Deductible is $50. There's a 30-day waiting period for claims and a limit of one phone replacement.

Exploring Your Options - Repairing a Damaged iPhone

While iPhone insurance tends to be less expensive than later repairs or replacement, the iPhone is a big investment, and not everyone is able to buy an extended warranty or insurance plan for it right away. If you find yourself with a damaged iPhone and no insurance for it, seeking independent repair might be the best solution for you.

My iPhone Repair (www.myiphonerepair.com)

For a flat rate starting at $107 for the iPhone 3G, My iPhone Repair will repair any damage, including smashed touch screens, water damage, and dead batteries. If the phone is determined to be un-repairable, a full refund will be issued (minus a $25 diagnosis fee).

Rapid Repair (www.rapidrepair.com)

For the mere cost of shipping, Rapid Repair will perform a free diagnosis of your iPhone and contact you within 24 to 48 hours with a no-strings repair quote.

Apple

Apple will repair any unintentional damage or replace your iPhone with a new or refurbished model under their out-of-warranty option for a fee of $199. This excludes any problems caused by unauthorized modifications (i.e. unlocking or jailbreaking).

Apple’s Out-of-Warranty Services

Most of us have had it happen at least once in our lives—a product we've invested a lot of money in simply fails. This drives most of us to rifle through shoeboxes of receipts to find out whether or not the product is still under warranty. Murphy's Law dictates that this will happen just days after the warranty expires.

If you find yourself in this unenviable position—out of warranty and without third-party insurance coverage—you have some options for replacement, including returning to the source.

You can still have your iPhone serviced or replaced by Apple after your AppleCare expires; just keep in mind that it's going to cost you.

Apple’s Out-of-Warranty Battery Replacement

If your iPhone battery dies prematurely, you can have it replaced by Apple for a fee of $79.

Apple’s Out-of-Warranty Service

According to Apple’s website, out-of-warranty service includes both mechanical failure and failure caused by accidental damage. The repair/replacement fee for out-of-warranty phones is $199 for all iPhone models.

The Great iPhone Battery Debate - Fact and Fiction

There’s lots of misinformation out there about the life expectancy of the iPhone battery. The fact is, if your iPhone battery dips below 50 percent of original capacity within the one-year manufacturers' warranty time frame, Apple will replace it at no cost. If you take advantage of the AppleCare Protection Plan, which costs an additional $69, the replacement time frame is extended to two years.

Life Expectancy

A CNET review of the iPhone erroneously stated that the life cycle of its battery will last the average user only 400 charges—or the rough equivalent of two years. A later New York Times review by David Pogue clarified that after about 400 charges, the battery only begins to lose full capacity but still retains 80 percent of its charging capacity. At that rate, the average iPhone user could go for quite a few years before having to replace the battery entirely.

Proper Expectations

The iPhone battery is no different from any other battery—it will eventually die and need to be replaced. iPhone batteries are no more susceptible to this fate than others.

Battery Replacement

iPhone batteries cannot be replaced by the user. In order to replace your iPhone battery, you’ll need to have it done professionally, either through Apple for $79 or by a capable professional.