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How to protect your expensive mobile phone

The growing popularity of smartphones and electronic gadgets in India obviously shows that people are willing to spend large sums of money sometimes even an entire month's salary to buy a mobile phone. Considering the fact that the second-hand mobile phones market in India is estimated at around Rs.400 crores, there is a good chance that all lost or stolen mobiles are resold in the grey markets of the country. The growing penetration of high end and smartphone market in the country has also increased the number of cases of thefts and accidental damages.

There has been a growing trend for increasing gadget protection with consumers opting for mobile insurance including extended warranty and theft protection. So if you are one of those eagerly awaiting a new expensive mobile launch from your favorite mobile phone manufacturing company, opting for mobile phone insurance may be a good idea. By paying a simple annual premium, mobile insurance can safeguard the phone from accidental loss or theft. Let us take an intrinsic look at mobile insurance and their pros and cons.

Understanding Mobile Phone Insurance:
Mobile phone insurance can be broadly categorized as a two faced protection- safeguarding the phone against technical faults and accidental breakages and thefts. Most mobile phones come with a company warranty of one year. This effectively means that any technical defect is covered by the manufacturing company. Since most high end smartphones available in the market today have a good shelf life, they usually start getting technical glitches after one or two years. What happens when your smartphone develops a technical fault after the expiry of the warranty period? It usually means you would need to bear the expenses of phone repairs, costing a bomb. The best way to avoid such a scenario is to opt for extended warranty.

Extended Warranty:
Mobile phone manufacturers as well as private players like www.bigfix.in are now focused on offering extended warranty support to mobile phone customers. Extended warranty gives the customer the added layer of protection even after the expiry of the first year of warranty. Extended warranty must be purchased within three days of purchase of the mobile phone. Considering the high cost of mobile phone repairs especially for smartphones, a nominal premium for extended warranty is highly recommended.

Theft Covers:
Theft covers are traditional insurance plans offered by general insurance companies safeguarding mobile phones against theft, loss or accidental breakage. According to an unofficial estimate, over 20 lakh mobile phones are reportedly stolen every month across the length and breadth of India. Such high instances of mobile theft can be countered if the customer opts for a mobile insurance plan. Unlike the western world where banking companies offer mobile insurance, Mobile insurance in India is limited to group plans offered by manufacturing companies. Popular handset manufacturers and retailers like Nokia and 'The Mobile Store' offer theft insurance plans for their clients.

Problem with Retail Insurance of Mobile Phones:
Although insurance companies are slowly opening up mobile insurance for retail customers, majority of mobile insurance plans are still sold through group plans. The first problem faced by the insurance companies is the fact that most clients are likely to replace their mobile phone in little over two years on an average. The fast deprecating market value of old mobile phones bring insurance companies face to face with moral hazard. Moral hazard is a phenomenon where policyholder gains after making an insurance claim. Considering the above factors, retail insurance for mobile handsets may mean financial loss for insurance companies.

Exclusions of Mobile Phone Insurance:
Mobile phone insurance covers include protection against fire, theft, accident or any damage to the mobile phone due to any other fortuitous circumstances. However before you take the plunge for insuring your phone, make sure you read the terms and conditions of the insurance service provider. Theft of a mobile from an unattended vehicle is not covered under mobile insurance. Likewise loss of phone due to personal negligence is also excluded.

Mobile Phone Insurance Claim Process:
In case an insured mobile phone is lost or stolen the customer needs to file a police complaint at the nearest police station. The mobile invoice or bill along with the police FIR must be submitted to the insurance service company or mobile store in case of a group insurance plan. All mobile insurance claims must be filed within 48 hours of the loss of the phone to obtain insurance claims.

Premium Rates and Depreciation Calculations:
Different insurance companies have different norms to calculate the premium prices for various mobile phone models. Generally mobile insurance policy premium is calculated at about Rs. 15 to Rs. 20 per Rs.1 000 of the amount indemnified. For a premium smartphone costing Rs.45,000 the premium can range between Rs. 675 to Rs. 900. Depreciation of the mobile phone cost when calculating claims is another significant factor. If the mobile is lost and a claim filed within 90 days of purchase, zero depreciation is considered. From 91 days to 180 day period, 25 per cent cost is depreciated while anything over 181 days leads to 50 per cent depreciation of the cost.

Article published by BankBazaar.com an online loan marketplace.

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