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What's the story with phone insurance?

Mobile phones are stolen every couple of minutes in Ireland, the mobile phone companies like to warn us. And if they're not being thieved, they are being lost in the pub or dropped in the toilet - which is why we should be eternally grateful for the peace of mind we get from the insurance policies we are artfully persuaded into when we buy a new model.

Or maybe we are just being conned into buying products which have little or no value and are just another example of big business making money out of consumers while purporting to act in their best interests.

There is a lot about the mobile phone insurance business that suggests it is the latter. The profits companies make are pretty shocking, for a start. If the policy covering an ordinary handset costs you €6 a month, you will probably pay out more than half the value of the phone in insurance every year. So, for your policy to make any financial sense, you'd need to make a claim every two years; more frequently if you factor in the excesses all companies attach. It's a bit like paying €200,000 a year to insure your €400,000 house.

And it's not just the relative cost to value that raises eyebrows. When it comes to mobile phone insurance, there are so many restrictions that it is hard to conclude it is not a waste of money, particularly when replacement handsets are so cheap.

Recently, a PriceWatch reader told us she bought her phone from a big retailer where she was also convinced she needed an insurance policy. She managed to hang on to the phone for four years before losing it in a taxi. As she had paid out more than €240 in insurance for a handset that was now worth a tenth of that, she was pretty confident that she'd get a nice new phone when making her claim. Instead she was told her policy did not cover her losing it in a public place.

So she upgraded at a cost of €100 - €140 less than the cost of the insurance policy over the period it was in effect. Enraged, she asked for it to be cancelled immediately, only to be told that while it was set up effortlessly in-store, it could not be cancelled with the same ease. She was told she'd have to ring an insurance company helpline during business hours, something she has yet to find time to do, so she is still paying €6 for nothing.

"Imagine the sheer frustration of losing your mobile phone and the impact being cut off could have on your personal and business life," the Vodafone website cautions. "Worse still, without insurance, a new phone could cost you as much as €135 above the prices in the shops because you probably won't be eligible for a first-time buyer's subsidy," it continues, before offering a policy at a cost of €5.99 a month.

A look at the terms and conditions shows excesses starting at €31.74. Once you have made one claim, the excess increases to €75, making the value of the policy even more questionable.

If you're unlucky enough to lose your phone a third time in a 12-month period, you can forget about reclaiming anything. Only two claims are even considered per year, as another PriceWatch reader discovered last year. She lost - or had stolen - two handsets in the early part of the year. She had her modest handset replaced, minus the combined excess of more than €100. She continued paying for her policy - only to be told six months later, when yet another handset was stolen, that although she had been paying her €6 for the previous six months, she had no cover and may as well have been sending a cheque to the phone thief for all the good it was doing her.

Other terms and conditions in the small print that preclude payment include: loss or theft following your wilful misconduct (although Vodafone is not clear on what it regards as wilful); the loss, damage or theft of the phone in the first 60 days of the policy being taken out (unless the insurance is taken out as part of your first contract); or its theft if left unattended anywhere public. So if you think you may have left your phone in a taxi, restaurant, pub or bus, you're not covered - unless, of course, you lie and say it was stolen.

The other companies are pretty much the same. Phonecover from O2 costs €6 a month. It has an excess of €35 and many similar terms and conditions to Vodafone's offering, although it replaces "wilful misconduct" with "undue care or negligence". One major difference is that it does cover the loss of your phone in public places, giving it an edge on the Vodafone policy.

Meteor Minder insurance costs €4.99 a month and has an excess of €33 on the first claim and higher again for claims made in a six-month period. For its part, 3 offers a replacement handset if yours is lost, stolen or accidentally damaged within the first 12 months for a small charge of €50.

Despite the restrictions, the phone companies claim customers are still more likely to insure their phones now than ever before - probably because they are increasingly high-tech. And, certainly, there is undeniable wisdom in taking out a policy covering the loss of a high-end phone or PDA. If a phone costs more than €500 to replace, it is certainly worth taking out insurance, even with all the terms and conditions.

While insuring many run-of-the-mill phones may be of limited value, being able to retrieve the data on Sim cards is of far greater importance, as anyone who has lost their phone will testify. Some operators do offer a back-up service and will make a copy of your Sim card, which you can access for a small fee if you lose your phone - although it is easier to download all contact details on to your computer or an old phone as back-up.

If your phone is lost or stolen, and you don't have insurance, you might find yourself being quoted an outlandish price to have the handset replaced. Don't pay it. Rather than shelling out unquestioningly, it might be worth considering switching networks. You get to keep your number and will probably be offered some class of deal sweetener by the new operator. And you get to teach your own operator a lesson.