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Is mobile phone insurance worth having?

A mobile phone is stolen every 12 seconds in the UK and, according to Halifax Home Insurance Services, phone thieves are costing the country £390 million a year. But is a separate mobile phone insurance policy worth having?

The British Insurance Brokers' Association BIBA doesn't think so. It warns that mobile phone insurance policies can prove expensive and may be difficult to claim on. Specialist insurance policies sold by mobile phone firms can range from £1.99 to £9.99 a month, adding up to more than £100 a year. This can be more than the cost of replacing a phone, with standard replacement handsets costing £40.

02 offers three levels of insurance for its contract phones. Gold insurance is £4.99 a month or £59.99 a year and covers you if your phone is stolen, lost or accidentally damaged. Silver insurance costs £3.75 a month or £44.99 a year and covers you if you are mugged or your phone stolen from secured premises. But it doesn't cover you if your phone is nicked from your car or if you lose it. On both policies the excess is £25.

Peter Staddon, head of technical services at BIBA, says, "The main reason for insuring a mobile phone is to cover replacement costs if the phone is lost or stolen and the potential cost of calls on the phone when it is lost or stolen.

"However many policies say that if the owner leaves their phone unattended in a public place and it is stolen or damaged then the provider can refuse replacement or payout. Also, some policies stipulate that 'airtime abuse' must be reported within 24 hours otherwise they can refuse to cover the costs."

BIBA advises consumers that it may be cheaper to add their phone to their home contents insurance. Some insurers will charge extra for this while others - such as Halifax - already cover mobile phones against theft, loss and damage as part of their personal belongings cover. However, customers should be aware home insurance will usually not pay out for the cost of calls made on the stolen phone.

According to Halifax data, Lancaster was Britain's mobile phone theft hotspot in 2005. In close second came Wirral and Chester then Coventry. Ipswich, High Wycombe and Oxford were the safest places for mobile phone owners. The most expensive phones were stolen in the Essex towns of Romford and Ilford where the average claim amounted to around £300.

Vicky Emmott of Halifax Home Insurance says, "New technology means that many of us use phones for more than just calls and text messaging. Mobile owners should make sure that all contact numbers, diary entries, pictures, down-loads and ring-tones are backed-up and saved elsewhere if they don't want to risk losing them completely."

Does mobile insurance ever make sense?

Anthony Ball of mobile phone comparison site Onecompare.com says taking out mobile phone insurance can sometimes be the best option, especially if you have an expensive handset. He suggests checking out various deals before buying cover as some phones come with up to three months' free insurance.

Ball also advises consumers to shop around for providers as some mobile providers will replace a handset and SIM card for free, even if it is a contract phone and it has been stolen.

In all cases, consumers should make a note of the unique international mobile equipment identifying number IMEI which is usually found on the inside of your phone behind the battery. If your phone is stolen you will need this number when you call your provider to block calls being made from your phone.

If you do take out a mobile phone insurance contract always read the small print as some companies set a very short time period to make the claim, some allow just 24 hours. Vodafone's Cover Me insurance has this clause and also stipulates that theft or malicious damage has to be reported to the police within 48 hours. Cover Me costs £6.95 a month or £83.40 a year.

Meanwhile Virgin Mobile's insurance costs £25 a year and has a clause which says you must report any theft or loss to both Virgin and the police within 24 hours. Once you have claimed on the policy and got a new phone you have to take out a new insurance policy, regardless of how much time you had left to run on the original one. So, in effect, you are only allowed one claim a year and the policy also comes with a £25 excess.

Moneyextra.com recommends you take independent financial advice before acting on any article

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2006-06-23 11:59:59 © Moneyextra.com