Is it better to pay an insurance deductible, or get an upgrade?
"You asked for simple, and I promise you this is... it just looks a bit math-heavy to start with because we have to handle a couple of different scenarios. Bear with me :) I find the best way to deal with these kinds of questions is to put together a ""Total cost"" for each option, for a sensible amount of time, and see what the difference is. We'll include the current cost for both options, plus the subsequent costs for 12 months: I find that more useful than a straight ""which is more expensive right now"" because it includes the potential costs of the next upgrade, and any changes to the plan. Let's throw some numbers together for the next 12 months (if your current plan is longer than 12 months, read the note at the bottom first) First, write down the cost of these things **The above assume that you have two options if you take the repair option (and only one option if you use the buy-out option). The two options we're assuming here are that you can either:  If you'd choose the same new plan regardless of whether you take the $100 or $150 option, there's no need to include both options: to simplify things you can just use the same numbers for both b/c and Pu/Py and the calculation below will still work. When you've found and written down the above, just do the sums below to find your two total costs over 12 months. Nothing fancy, just plug the numbers above into the equation. eg if Pe (eBay value of the phone) is $80, replace Pe with 80. Don't forget to do the parts in brackets first! That's your total cost for both options for the next year. Note: I'm assuming that your plan ends within the next 12 months. If not, just replace 12 in the above calculations with another term! You can also do this if you want to find out the price difference over a longer period (noting that if you upgrade to the same plan regardless of choice, you'll get the same answer for any period longer than your current contract)" If you repair your phone, when your current balance is paid off, could you get the same coverage for less money? Or would your monthly payment remain the same regardless? That would be the easiest comparison to make.  ie: Pay an extra $49 to have the phone replaced [ie: the cost of using the insurance program for $149, vs the cost of buying out your plan for $100], get a slightly worse phone instead of upgrading, but save $15 / month for the next 2 years. This would pay off economically within 3-4 months, but the phone would be older (not sure if you care about that). I would go for the upgrade and cancel the insurance. It's been 5 years since I left the post paid subsidized phone world and I'm WAY better off.  I use ATT GoPhone and I buy my phones in cash.  If I shatter my phone, I replace the screen or simply buy a new one.  Sites like swappa.com make buying and selling phones a breeze and you save a bundle of money leaving the carrier subsidies and ridiculous insurance programs on the table. "I think you have a few choices that cannot be described by math alone: Repair current phone:  149 Replace current phone with new model from carrier:  100 + cost of new phone Replace current phone with new model on payment plan from carrier:  100 + cost of new phone + finance charge (could be zero or cleverly hidden). You can also replace the current phone with either a used or new bought from a separate party.  Quite recently I was selling some gently used IPhones 4S for around $140.   So really you have to determine what is most important to you guys.  Is it important to have the newest model phone with laying out the least amount of cash now?  Then by all means go with the payment plan with your current carrier. Is it most important to be financially efficient, while having a good working phone?  Then pay the deductible; or buy something gently used.   In my opinion, having a phone payment is a losing game, akin to buying a new car every three years or so.  You are buying something on time that quickly depreciates and hiding the true cost of the item in ""painless"" monthly payments." I'm going to guess you're on Verizon and your wife has an iPhone. I just went through this exact same situation with my mom's phone last week. When you're off contract with Verizon you're saving $25/month on your plan (at least, I am), so staying off contract is big. If you do the monthly payment you're paying full retail over 2 years, without interest, so you do stay off contract at least. Here's the thing, as long as it's a 16GB iPhone 5 or better, you're going to be able to Craigslist it for the cost of the deductible, no problems. To me that makes the decision pretty easy to make. As long as you can Craigslist it for more than the deductible, get the insurance replacement. Then when you want a new phone you can sell your old one. Since you can sell the phone, I think that makes the comparison between the deductible and deciding to pay off the $100 now and start payments on the new phone less relevant. The real comparison I'd suggest looking at is the value of the phone and the deductible.
I edited in the total annual out of pocket for each level to help illustrate what's going on. Your question makes sense, of course, but it's less a matter of afford vs an attempt to save. The way these plans work is to allow some choice based on your past experience. I can afford any option, but knowing the number of visits we have had in the past, the lowest cost option has the highest premium. A young couple who hardly sees a doctor may choose the highest deductible, risking the potential $3434 extra they may pay in a bad year for the savings of $1016.  Personally, I'd not be able to guess accurately enough to benefit from the middle choices, and can see the two extremes being picked most often. There is an opportunity cost of your future insurance needs, Here, the savings vs risks ratio is difficult to figure out. Hence it is always worth that extra cost to buy the larger and longer policy if you can afford it. Basically if you can afford it today, it will cost peanuts after 20 years. "You have several issues at work. If in the next few years you have a leak in the roof that causes another insurance claim, they may decide not to cover it because they already paid you to replace the roof, and it is your fault that it wasn't. That might also mean they don't pay you for the stuff that is damaged because of the ""new"" leak. If you minimize the claim that may make it less likely that they will drop you in the future, or increase you rate next year. But if you don't return the excess funds they will evaluate you on the larger claim size. Of course if they are sending the money directly to the repair company they will only pay the bill up to a maximum amount. Usually the issue has been that the repair company wants to do a larger repair. The dispute resolves around some aspect of the building code. I had a car repair that had to be increased because the roof damage was within x inches of the windshield, so the windshield had to be replaced. The insurance company eventually agreed but it slowed down the process for a couple of days because they wanted to measure it. It is possible that the insurance company has rules related to the age of the roof and the amount of damage that triggers a total replacement." "Based on the updated information  ""I'm able to get my health insurance in full from my old job which is   why still have it(ABC). Anthem Blue cross only costs me about 15   dollars a month. At my new job I work full time so I took up the   healthcare because eventually I will more than likely get rid of my   old one(or loose it)."" There are a couple of issues:  The old company will no longer be paying for the ABC policy, you will have to cover the entire cost. The cost could be significantly m ore than $15 a month. One will be primary and one will be secondary. You will have to tell them about each other. How they will interact when one is a percentage and the other a copay will have to be investigated. Look back at all your procedures from last year, and ask how they would cover them. You will also need to see if your doctors and specialists are in both networks. This could create situations where the 2nd policy provides no coverage because you went out of their network. You could also require multiple referrals." Generically, like farnsy noted in the other answer, you will only come ahead in dollar terms when you are significantly riskier than the average insuree. Otherwise the insurance company would have higher rates to make a profit. In the case of Apple Care there can arguably be other factors involved. If you did not insure your $2000 laptop and it broke (unfixably) just after the warranty period, would you replace it with a new Apple product? Maybe not, so Apple could lose a customer. That means they have an incentive to keep you happy. If your product breaks but insurance replaces it, you are a happier customer and more likely to buy other Apple products. This is not an incentive for traditional insurance companies that only do business in insurance. Now, with the profit margins Apple likes in general, I don't know if they've underpriced their insurance. I sort of doubt it even. But their margins on it are probably not high, meaning it's a closer call even if you are only averagely risky. The odds could very well be in your favor, even when the insurance company expects profit. What matters to you is not the expected amount of money you'll have, but the expected amount of utility you'll get from it: getting enough money to buy food to eat is much more important than getting enough money to be able to buy that fiction book too. The more money you have, the less a dollar is worth to you: consequently, if you have enough money, it's worth spending some to prevent yourself from getting into a situation where you don't have enough money. You seem overly fixated on dead tree documentation of purchases.  They are deducting this from your account monthly - the mere fact that the money was taken is enough to prove in court that they have you on their books and to hold them to paying out said insurance.  The email copies is actually a better way to organize receipts in most cases (can't be destroyed as easily, etc.) You can cancel the insurance - but don't just stop paying (you'd owe them money then).  I foresee increasing difficulty navigating the 21st century for you unless you can get past this concern about physical receipts.  I doubt other companies would do much better. FWIW, I live in the continental US.  I don't know how different the Philippines is with regard to moving everything to digital "My knee-jerk reaction was ""no, they are not worth it"", but I took a little time to look up what some of the trusted names in consumer electronics reviews had to say about extended warranties/service contracts. A cnet writer said that your decision should consider the price of the service contract relative to the price of the item you're buying, as well as the amount of hassle you're willing to endure, should something go wrong. Consumer Reports believes that the warranties that come with your products are almost always enough, and they say that electronics and appliances are so well-built nowadays, the likelihood of you needing extra service before you upgrade are slim-to-none. And the folks over at epinions.com offer the same maybe-yes-maybe-no advice as the cnet guys: depends on your appetite for risk and the options available to you. So I would suggest that the answer be ""no"" most of the time, but consider it anyway." "One way to look at insurance is that it replaces an unpredictable expenses with a predictable fees. That is, you pay a set monthly amount (""premium"") instead of the sudden costs associated with a collision or other covered event. Insurance works as a business, which means they intend to make a substantial profit for providing that service. They put a lot of effort in to measuring probabilities, and carefully set the premiums to get make a steady profit*. The odds are in their favor. You have to ask yourself: if X happened tomorrow, how would I feel about the financial impact? Also, how much will it cost me to buy insurance to cover X? If you have a lot of savings, plenty of available credit, a bright financial future, and you take the bus to work anyway, then totaling your car may not be a big deal, money wise. Skip the insurance. If you have no savings, plenty of debt, little prospects for that improving, and you depend on your car to get to work just so you can pay what you already owe, then totaling your car would probably be a big problem for you. Stick with insurance. There is a middle ground. You can adjust your deductible. Raise it as high as you can comfortably handle. You cover the small stuff out of pocket, and save the insurance for the big ticket items. *Insurance companies also invest the money they take as premiums, until they pay out a claim. That's not relevant to this discussion, though." The point of insurance is to trade high variable costs for much lower fixed costs. The question isn't whether you can afford what would be a catastrophic event for anyone else, but whether it would be better to pay a small amount regularly vs. a possibly larger amount occasionally. One of the reasons to buy insurance is to avoid costly litigation (rich people are more frequently targeted for litigation). By purchasing liability insurance, the insurance company pays for the litigation and/or settlement. If you are wealthy enough to keep an experienced litigation firm on retainer, you may not need that benefit, but it might be worth giving that stress to a third party. Life insurance is also an important part of estate planning because of the tax treatment of insurance payouts compared to the tax treatment of a large estate. There are certainly classes of insurance that make less sense for those with great cash flow, but money doesn't obviate all the benefits of insurance. I would go with option B. That is safer, as it would leave you with more options, in case of an unexpected job loss or an emergency. "While a lot of the answers focus on cost to replace and how much money you should have for tangible goods. There are a few more issues to consider.  However before we get started, these issues are not related to ones net worth. They are related to other factors. Having money certainly helps, but someone worth only $10 may not need to insure their stuff under some circumstances. Insurance is a risk avoidance strategy.  As such, it should be used to avoid risks that would otherwise cause issues for you. The normal example is a house. If you lost your house due to fire, would you be able to ""make it"" while you paid the mortgage off, and got a new mortgage to pay for a new house? This is a relatively simple view, but a good one.  These days people tend to look at insurance as a savings account. I payed in X so I am entitled to Y. Heath insurance (a bit more on this later) is exacerbating the issue by selling it's self that way, but it simply isn't true. What your paying the premium for to avoid the risk of loss. Not so you can have a pool of money to draw from in time of need, but so that a time of need should never arise. Which brings us back to, should you get insurance?  Tangible Assets Let's assume you have no legal or contractual obligation to have insurance. If you put the money you were spending aside would you have enough money to secure a new asset should your current one just vanish? This is the normal argument. But it has a second side. Do you need the asset at all, or can you just accept the loss. Lets pick on a red neck for a second. While certainly not millionaires, or ""well off"" by conventional means, the guy with 6 cars on bricks in his lawn does not need to insure 6 cars. If one were to vanish, it may make a hardship but hey, he's got 5 more. So with tangible goods it's more of a question of can you afford to replace the item, do you need to replace the item, and how big a risk is it to you to loose the item? What would you rather loose, the item, or the cost of the insurance? Non-tangible Assets I am going to try to keep this as un-rant like as I can manage, but be aware that I am biased. There are two big examples of non-tangible assets that are commonly insured. Life Insurance, and Health insurance. There are others, but it's very hard to get people to pay money to insure something that they don't actually have. Ideas can be insured, for example, but in order to insure an idea you have to spell it out, at that point why not just file for the patent etc. etc. Keep in mind that a lot of people and companies will insure against losses due to IP theft or other such intangible things. Largely these follow the same rules as tangible assets. This section is meant to focus on those insurances that do not. Life Insurance Life insurance is a bit odd. Were all going to die, so it seems like a ""good bet"" but what your insuring against with life insurance is an early death. For term life insurance it's a gamble. Will you die before your term runs out. For full life insurance (with no term) it's a different gamble. Will you die before you have paid in what they agreed to pay out. In many cases it's also a gamble that you will miss a payment or two and cancel the policy before you die. If the risk of your death worth the insurance. Usually while young the answer is yes. Do you leave your Family short one earner? Will they make it without the insurance? But as you get older, as life insurance becomes more of a sure thing it also becomes less needed. Your kids move out, there not dependent on you any more. You have retirement accounts setup so your partner need not worry should something happen. What risk exactly are your trying to avoid at this point. You will die. You have planned for that eventuality, it's not a risk anymore, it's a fact.  Heath Insurance Is another beast all together. Historically you insured against some catastrophic event, that you couldn't really plan for. Say a heart attack. Surgery and treatment would run in the tens of thousands, so it would ruin you if you didn't have insurance to cover that. That was the risk that you were avoiding. A big, expensive event, causing financial ruin. However, over time it has shifted into something else. The general concept is still there, insure to avoid a risk. But the ""risk"" has been widened to include all manor of things that are not actually risks.  For example a flu. You would go to your doctor, pay your co-pay, and your insurance would pay the rest of the visit. Then you would go to the drug store and get the drugs, pay your co-pay and the insurance pays the rest. But what risk, in this instance are you insuring against? That you can't cover the cost of a doctors visit? That you can't cover the cost of the medication? In this example, a common one, historically the ""mother of the house"" would go you have a flu, have some chicken noodle soup and go to bed. That would be the end of it. Cost of care is a day's lost wages (or maybe a weeks) and a few cans of soup.  However today, because we choose to, the cost of care is much higher. We go to the doctor, pay our co-pays, the insurance has to pay it's part. The doctors office has to carry the cost of the staff it takes to see you, and the staff it takes to handle the claims with the insurance company. And now your flu, cost $1,500. But again that's not exactly true either. With heath insurance and ""normal"" medical care (like sprained ankles, and colds, etc.) the insurance only really covers the cost of having insurance. In that same flu example, if you went to the doctor as a ""self pay"" (no insurance) you would often time get a much lower, and reasonable rate. Frequently, under the cost of your standard co-pay. This seems like the doctors being ""bad"" but it's not. They don't have to file a claim, they don't have to keep track of it. They get immediate payment, not payment 6 months down the line that they need to share with other businesses. With ""critical"" or ""catastrophic"" care, heath insurance is still a good thing. If you have a big, unforeseen event, then heath insurance is great at helping you avoid that risk.  With chronic (long term) care, your back in the same boat as the flu. Often times you can get better, and cheaper, care as a self pay patent, then as a insured patent. That is not always the case however. So you have to measure your own circumstance, and decide if insurance is right for you. But remember insurance is about risk avoidance, and not about paying less. You will ALWAYS pay more for insurance. It's designed that way. Even if the cost is hidden in many ways. (Taxes, spread out over visits, or prescriptions, etc.)" On most of the consumer electronics it would not make much sense to get Insurance. Mostly these are not priced right [are typically priced higher]. IE there is no study to arrive at equivalent claim rates as in motor vehicle. Further on most of the items there is adequate manufacturing warranty to take care of initial defects. And on most it would make sense to buy a newer model as in todays world consumer electronics are not only getting cheaper by the day, but are also have more function & features. In all probability, having lower coverage levels will result in higher premiums. As my insurance agent explained to me, the higher your coverages, the lower the insurance company believes your risk to be - because you think about insurance smartly, you're less likely to make spurious claims. I have my coverages run at various levels every 18-24 months, and it is almost always true that higher coverages result in lower premiums. Also, there is no guarantee you'll still be employed by the same company if an injury happens. Or that they'll continue to offer the same plans every year. Insurance is a calculated risk on the part of the insurer, and a means of sharing/deflecting risk (at a cost known as your premium) on the part of the insured. Even if your premiums are slightly higher (on the order of a couple dollars per month, for example), do you really want to save a couple dollars and then be surprised when your health insurance company doesn't want to cover something? "Let's face it: most people pay more in insurance premiums than they ""get back"" in claims.  I put ""get back"" in quotes because, with very few exceptions, the money paid out in claims does not go to the insured, but to others, such as doctors and hospitals.  But even if you ignore the question who does the money actually go to, it's a losing proposition for most people. The exceptions are those who have a major loss, greater than what they put in over the years.  But never forget: these are exceptions.  The return on your money, on the average, is only a little better than playing the lottery. The usual counter-argument to the above is, but what if you are one of the exceptions?  I for one refuse to let my life be dictated by worries of unlikely events that might happen.  If you're the sort who obsesses on what could (but probably won't) happen, then maybe you should have insurance.  Just don't tell me I need to do the same. When I lived in California, they had a program where you could deposit $25,000 with the State, and then you could drive, legally, without insurance.  I did this for a while, didn't have any accidents, and exited the system (when I moved out of state) a few years later with more money (interest) than I put in.  You don't accomplish that with insurance. But let's get back to rich people.  Unless you get into an accident with you at fault and the other guy needing a head transplant as a result (joke), you could probably absorb the cost of an accident without blinking an eye.  Those in the upper-middle-class might do well with high-deductible insurance that only pays out if there's an extreme accident. Then again if you have to borrow to buy something expensive (making monthly payments), they will usually demand you buy insurance with it.  This is a way for the lender to protect himself at your expense, and if you refuse, good luck getting a loan somewhere else. I hate the idea of insurance so much I would make an act of insurance punishable by law."