Is $15/Month To Best Buy Worth A New Replacement Phone?

Phone insurance plans are often not worth the money you spend on them; especially since many credit cards already include extended warranty protection at no extra cost. But a Best Buy customer in California feels burned by Best Buy’s Mobile Phone Plan after she paid more than $250 in insurance payments and had her broken iPhone replaced with a refurbished device that cost less than what she’d paid out.

According to the suit, filed last week in a U.S. District Court in California, the woman bought a $199 iPhone 4 from Best Buy in November 2010. She also decided to sign up for the insurance plan at a cost of $14.99/month for 24 months.

“At no time was plaintiff ever given a copy of the terms and conditions, nor was she directed to some place where she could find them,” claims the complaint. “She did not subsequently receive either a Plan contract or the detailed terms and conditions.”

Seventeen months and $254.83 (plus tax) in payments later, she damaged her phone and took it into Best Buy to take advantage of her insurance policy.

She was provided with an iPhone 3G as a loaner phone, and was she told she couldn’t get a replacement iPhone 4 until after Apple had received the damaged one. This was also the first time she was informed the eventual replacement would be refurbished device.

“Had she known at the time of purchase of the Mobile Phone Plan that she would only ever get a refurbished phone instead of a new one, including a difficult and inconvenient loaner phone process, she would never have paid so much for the Best Buy Mobile Plan or bought it in the first place,” reads the suit.

The lawsuit alleges unfair competition, deceptive advertising, breach of warranty, bad faith and unjust enrichment, and is seeking class-action status for all California residents who purchased phone insurance plans from Best Buy within the last four years.

“Best Buy failed to provide material details to the consumers of the coverage under the Plan except to provide them a short summary brochure of the categories of coverage,” reads the complaint. “No reasonable consumers would pay $14.99 + tax a month for two years… when the phone cost only $199.00 if they did not believe that they would get a new, rather than a refurbished, phone.”

Class Calls Best Buy Cellphone Insurance Bunk []


Edit Your Comment

  1. SlappyWhite says:


    • vastrightwing says:

      Mistake 1. buying anything at Best Buy. Mistake 2. buying an extended warranty. Mistake 3. paying way more than what is reasonable for something they should not have bought in the first place. Mistake 4. buying anything without knowing the rules.

      I never buy warranties on anything that costs less than $5,000. I’m willing to take the risk myself. I won’t buy throw away electronics for more than $1,000 because even if you have a warranty, they make it such a hassle to collect on a claim, it isn’t worth it.

  2. baineschile says:

    isnt insurance there to pay out less than what they take in?

    • bikeoid says:

      For normal insurance, only to pay out less to the entire risk pool than they take in. That’s with the assumption that not all risk pool members will make claims.

      For Best Buy Phone Insurance, ‘paying out less than they take in’ has been extended to include claimants as well.

  3. CommonSense(ಠ_ಠ) says:

    Sorry, but no reasonable person buys a $359.76 warranty for a phone that costs $200.
    Lawsuit = fail

    Next time she will get the warranty that is like $50 extra instead of this crazy $359.76 extra one.
    I had a phone warrant through ATT a few years ago. It was only $5 a month.
    I actually used it once, but for 2 years that would only have been $120 not $359.76.
    Crazy people are crazy.

    • cowboyesfan says:

      if you bought an iPhone without a telecom subsidy it’s $650.

      • AustinTXProgrammer says:

        I was going to reply with that, but $359 in insurance costs for a $650 device you should be trying not to break is a really bad deal anyways. And the refurbished replacement isn’t a $650 device.

      • CommonSense(ಠ_ಠ) says:

        The subsidy covers profit margin not the actual cost of the phone.
        At $200 they still make money on the phone.

        • MissingNumber says:

          The carrier losses money when the phone goes out at that price. The only people making money on a $200 iPhone are the folks at Apple.

  4. Scoobatz says:

    “No reasonable consumers would pay $14.99 + tax a month for two years… when the phone cost only $199.00 if they did not believe that they would get a new, rather than a refurbished, phone.”

    I’d argue that no reasonable consumer would pay $14.99 + tax a month for two years for a $199 phone regardless.

    • jimbo831 says:

      The problem here is that the phone doesn’t cost $200. It costs $200 plus a 2 year contract for service that costs ~$70 per month. Without a contract, an iPhone costs more like $700.

      • CommonSense(ಠ_ಠ) says:

        The subsidy is for profit margin only not the actual cost of the phone.
        At $200 is more than the cost of the phone so they still make a profit at that price.
        The reason they sell it at $700 and then subsidize it down to $200 is to make you think you are getting a deal and so you will sign a contract.

        • MissingNumber says:

          You should probably take a look at the recent articles about Sprint losing money due to their iPhone contract.

  5. CrazyEyed says:

    C’mon people, stop throwing the $199 around like its the true cost of the phone. Everyone knows these phones are subsidized. Many phone providors (regardless if we thing its right or wrong) give you refurbished or certified pre-owned phones when the current device fails or is damaged. This isn’t news but…

    On a similar note, I love seeing Best Buy and Lawsuit in the same sentence.

    • CommonSense(ಠ_ಠ) says:

      Sorry, but an iphone is profitable at $200 so the only subsidy is for apple’s markup.
      Apple prices its phones for the price of a decent laptop just so people think they get a deal when it is “subsidized” to $200.

      • simonster says:

        > Sorry, but an iphone is profitable at $200 so the only subsidy is for apple’s markup.

        An iPhone costs $196 to manufacture according to iSuppli. If Apple only had to pay for the slaves at Foxconn they’d be making a 2% profit, but there are marketing, R&D, etc. costs involved that almost certainly make the per-device cost exceed the $200 mark.

        • CommonSense(ಠ_ಠ) says:

          R&D is always included in the cost of materials for a manufactured good.
          Anyways, I think that price listing is a little inflated (they list components at twice their actual costs).
          But even going by those prices Apple makes a killing off of 32gb and 64gb models.
          But as I said at $200 they still make a profit.
          Apple can tell you that it is a $2000 phone and subsidized you can get one for $200. Then magically is it now a $2000 phone??? nope…

    • az123 says:

      I think the $199 comments above are legitimate, clearly the person in the story viewed the phone costing that much and does not get the actual cost, therefore their choice to pay that for the insurance was based on that assumption and therefore the comments about paying that much for a warranty on a phone are legit

      • dicobalt says:

        The phone companies need to stop hiding their subsidy fees. The reason service costs so much is the service fees pay for the subsidies. Most people don’t realize this and that is wrong. Service needs to be service and subsidy needs to be variable and appropriate for the device being subsidized. Someone who subsidizes a $100 phone shouldn’t be forced to tow the line for people subsidizing a $700 iPhone. The person who got the $100 phone should have a lower monthly subsidy fee and lower total monthly bill.

        • RvLeshrac says:

          Service price has nothing to do with the “subsidy.” The iPhone only contains an additional $30 of technology over the iPod Touch, and costs $0 more to manufacture than the iPod Touch, so claiming that the phone requires an additional $400 as a “subsidy” is complete bullshit.

          • scottd34 says:

            despite the fact that you feel this way, it is the way the pricing is. Look at contract vs no contract pricing on every carrier that sells it plus apples site.

    • BurtReynolds says:

      True. Unfortunately for this story, the only thing I read here that had me scratching my head was why Best Buy cares about the phone going back to Apple before it pays out. If it was an Apple warranty claim, then why was Best Buy involved at all? If it is a Best Buy claim, then why aren’t they deciding if it is broken or not.

      When my wife bought her 4S, I asked the Verizon guy trying to push the equally expensive “protection plan” two questions:
      1. What is the deductible? $150 or something
      2. Is the replacement a refurb? Yes.

      That was all I needed to know, especially seeing how expensive it was anyway.

  6. Cat says:

    “No reasonable consumers would pay $14.99 + tax a month for two years… when the phone cost only $199.00 if they did not believe that they would get a new, rather than a refurbished, phone.”

    So, according to her own attorney, Debra Wanless is an unreasonable consumer?

  7. az123 says:

    Um, that phone does not cost $199…. to replace that with a new phone would be well over $500. The person is an idiot for paying for that but in reality I seriously hope they get tossed out of court, if you are that stupid and do not check what you are purchasing then you need to loose your money.

    This is a case of I did not bother to check, just assumed what I was getting and I am not happy about it so I am going to sue. Sadly, even though they are ripping people of charging that much for the plan, I will hope Best Buy wins in this case

    • CommonSense(ಠ_ಠ) says:

      As opposed to tightening your money?

      • Captain Spock says:

        I see what you did there! Seriously, in the last few years I have seen a ton of people use “Loose” instead of “lose” is this is what is happening to the younger generation?

    • Dr. Shrinker says:

      Or, they could be like T-Mobile who blatantly lied and told me that the insurance would provide for a new phone (and a new iPhone 4 would have cost far more than the $250 she shelled out).

  8. Hi_Hello says:

    $199.00 is new with a 2 year contract.

    Let me know where she can get a brand new iphone 4 for $199.00.

    If she didn’t buy this plan, and her carrier let her do an early upgrade, she’ll probably be out of 199.00 for a new phone plus 30-50 for the early upgrade. I’m not sure if this is possible or how easy it would be..

    but I think either way it would cost her about the same thing.

    the only thing they will got on best buy is that they didn’t gave her the paperwork. If I was bestbuy, I would’ve said we did gave it to her, on the back of her receipt that we emailed to her.

  9. Nigerian prince looking for business partner says:

    Insurance works best when protecting against catastrophic financial loss. Without some kind of 3rd party subsidy, insuring against a $200 refurbished phone, a $100 doctor’s visit, a $50 eye exam, or a $10 prescription virtually never makes sense.

    The lower the value of what you’re insuring against, the proportionately higher the premiums will be.

  10. Blueskylaw says:

    If the policy states that they would replace the device then she has no case. If the policy states that they would replace a broken device with a new one then she has a case, but why would Best Buy offer a new device when they have millions of broken phones that they give you after fixing them for $20 and after collecting hundreds of dollars from you in monthly fees.

  11. Hungry Dog says:

    It’s much cheaper to put that money in a bucket and then buy a contract free phone online if the regular phone breaks. They will also replace your phone with one of equal or lesser value, which means you will get a POS when your phone becomes “old” in 6 months.

    • rdaex says:

      Show us where this magical cheap iPhone is?
      Not that the insurance makes sense EVERY time… but you cant find iPhones for less than 400 bucks, even USED

  12. wellfleet says:

    Gosh, if only there was a simple, convenient place to see the terms and conditions of your warranty… Like this maybe?

    There are a gajillion different parts to the warranty. If she were interested in ALL of this information, she would have and could have asked for it. But consumers are mostly “yeah yeah whatever gimme the phone” and rarely bother to listen to what the rep is actually telling them.

    Also, the phone isn’t a $199 phone. An iPhone 4S, bought outright, is $600+. She only got it for $199 because she either upgraded and renewed her contract or signed a new contract.

    If, for example, she bought the phone outright with no warranty and broke it after x months, she would be SOL unless her phone company allowed her an early upgrade, in which case she would pay $200+. This is an important distinction and the OP is a bad consumer for not reading the terms and conditions before consenting to pay $15 a month for 17 months.

    Imagine if you were trying to lease an apartment and the landlord didn’t give you a copy of the lease. Would it occur to you to ask for one? Of course! Then why aren’t we holding the OP to the same standard?

    • dicobalt says:

      Yea, that iPhone is not $200, she doesn’t realize that her inflated contract service prices are actually hidden charges for subsidized hardware with a nice fat profit margin tacked on.

  13. gman863 says:

    I pay $5 per month to insure my phone against loss or damage with AT&T, $50 deductible.

    When I lost it on a bike ride last year, I had a new one in 48 hours, no hassles.

    Me thinks someone got screwed royally.

    • Something2Say says:

      AT&T’s plan (through Asurion) also has a $199 deductible for iPhones and other “Tier 3” smartphones, but the monthly charge is not as much as Best Buy’s. At the time the customer purchased the iPhone in November 2010, the insurance through Asurion was $11.99 a month (for iPhones only). It’s been $6.99 per month since October.

      So the high deductible probably was unavoidable from any avenue, but the $14.99 is a high monthly charge.

    • MissingNumber says:

      What smartphone do you have that you only have to pay $50 to replace it?

  14. Droford says:

    I wonder if they offered a new phone in exchange for a 2 year contract extension?

  15. dicobalt says:

    Why would you be paying Best Buy for phone insurance? That should be handled by the phone company, it costs less anyway. Why would anyone care if it is refurbished? You break a used phone and you get a replacement used phone. Those refurbs are as good as new anyway. This lady needs to blame herself for not comparing other plans and then buying from a questionable retail outlet like Best Buy.

    • Latentius says:

      I can’t really speak for each individual carrier, but believe it or not, most people’s experiences replacing phones through Best Buy are pretty painless. If you have a protection plan, it pretty much goes like this:

      1) Walk into Best Buy, go to Mobile department.
      2) Tell them you broke your phone and you have the protection plan.
      3) Employee looks up receipt info to get protection plan number.
      4) Number gets entered into system, phone is taken (minus any accessories), and you sign a service order.
      Optional: Get a loaner phone.
      5) In 2-4 days, you get a call that your replacement phone is in.
      6) Walk into Best Buy, go to Geek Squad to pick up new phone.
      Optional: Go back to Mobile department to have phone set up, if it doesn’t use a SIM card.

      It’s usually pretty painless, very very few claims are denied, and it only takes a couple days. That’s not to say there aren’t exceptions, but 99% of the time it’s surprisingly smooth.

    • MissingNumber says:

      It sounds like it’s the same as car insurance: pay more up front and less if you actually have to use it.

  16. Cat says:

    Her phone was 2 years old. In a few more years the only iPhone 4 she will be able to get will be a refurb.

  17. Jawaka says:

    So let me get this straight, she purchased a warranty and never once though that there might be terms and conditions? She never thought that there might be paper work to go with the contract that she signed?

    It sounds like the customer purchased an apple warranty since Best Buy is claiming that she can’t get her replacement until apple received the defective one.

    and as for refurbished, doesn’t every warranty replace damaged goods with a refurbished one?

  18. Cat says:

    FROM the article:
    She claims a Best Buy employee told her that the plan was “the best insurance one could buy for mobile phone. She was told that all she needed to do was bring in the broken phone and Best Buy would hand her a new phone,” according to the complaint.

    If I had I dollar for every time I heard some idiot say “But, THE SALSEMAN TOLD ME…” I could be retired by now.

  19. consumed says:

    I’ve found that SquareTrade is the best kept secret for these warranties. $90 for a 2-year ADH warranty, with no deductibles.

    I shattered my iphone back glass, took my iphone to the apple store, apple charged me $150 and I had a replacement iphone 4 right away.

    Submitted my claim to SquareTrade and they sent me a $150 check in 5 business days. The warranty MORE than paid for itself.


  20. Chaluapman says:

    am I the only one here that realizes that a replacement iPhone costs more than 200

  21. donjumpsuit says:

    This is unbelievable. As everyone points out, the phone is $600, not $200. If she was on my iPhone replacement plan, she would know that every two years you pay $199 for a new phone, with the bonus of being able to keep and sell the old one for around $200. If it breaks or is lost, just use a back up!

  22. milkcake says:

    This article is so wrong on so many levels. First, no, the phone doesn’t cost $199. It costs more than that. It’s freaking subsidized. Second, OP got what she paid for. Third, no, she should not have signed up for Best Buy’s anything. You just don’t deal with BB in long term relationship. You get a good deal and be out, that’s it. Well, I hope she learned her lesson and move on.

  23. framitz says:

    It’s Best Buy… don’t go there, enough said

  24. hexx says:

    I can’t believe Best Buy actually got someone to shell out $15/mo for their insurance program. That’s twice what Verizon charges for their equipment warranty program, and I assume the other carriers have a similarly priced plan. The terms of the insurance, which the customer claims not to have received, probably states the replacement is a refurbished phone. The carriers will often replace a phone with a refurbished model also.

  25. Woodside Park Bob says:

    My guess is that Best Buy put the phone buyer under extreme sales pressure to buy this “insurance.” I recently bought a TV at Best Buy because they had the best sale price by far for what I was looking for. The sales person literally refused to process the sale unless I listened to his pitch for an extended warranty even though I told him repeatedly I did not want the warranty, wouldn’t buy it, and he was wasting his time. Eventually when he wouldn’t process the sale and continued to try to make me listen to his extended warranty sales pitch, I walked away and found the manager on duty, who apologized for the situation, and sold me the TV. I suspect the phone buyer was subjected to the same sort of nonsense but was too polite to tell the salesman that if he wouldn’t sell the item without the sales pitch, he wouldn’t sell the item at all, and walk away from the salesman.

    • Latentius says:

      If that’s true, then it’s pretty lame, but I imagine you’re exaggerating just a bit.

      However, even if a salesman IS being pushy, you’re under no obligation to actually BUY what they’re selling. Sure, she may have just politely listened to the whole spiel even when she didn’t care. No one forced her to actually purchase the protection plan, though, and if she ignored the terms and conditions when they were being described to her, that’s her own fault and no one else’s.

      And just being a little defensive here (even though I’m not a salesman), do you have any idea how much time customers take, asking questions, comparing models, etc.? I’m not saying you did, and I’m definitely not saying it’s a bad thing. My point, though, is that when you sequester a salesman for 15 minutes, I’d say he’s at least earned a minute of your time to go through his sales pitch. Either way, listening to something–even if you’re already aware of what’s available and you’re certain you don’t want it–is not going to kill you. Try giving one minute to be polite, okay?

      • MissingNumber says:

        Actually had a saleperson thank me for letting him get through his whole spiel about signing up for some customer loyalty program at GameStop even though I didn’t sign up.

  26. Latentius says:

    Let’s see, so much wrong with this lady’s story.

    First off, the phone wasn’t $200. It was $200 *WITH CONTRACT*. The phone alone without a contract likely would have cost somewhere in the neigborhood of $500-600.

    Second, she most likely *was* given the terms and conditions, and either lost them or threw them away. If nothing else, it would have been explained to her at the time. Ignorance is not an excuse on her part.

    It is quite clearly explained that you don’t get a brand new phone. That just doesn’t make sense, and you’re an idiot if that’s what you expect. If you sent off your damaged phone, had it fixed, and then sent back, you’d be getting back a used phone (even though it’s yours). If they did it this way, it’d take several weeks. Instead, when you bring in a broken phone, as soon as it’s in the system, a replacement is on its way, meaning it takes 3-4 days. Either way, you’re getting back a used phone, it’s just that the “rapid exchange” method is much quicker about it.

    Third point, she knew how much she paid for the phone, and she was on a monthly plan for insurance. If she were intelligent, she would know to simply cancel the plan once enough months had past that she wouldn’t be getting a bargain.

    Fourth, a loaner phone is a luxury. She’s lucky that she was given ANY option to still have access to a phone during the time that her broken one was being replaced. Now she’s just starting to sound like an entitled little brat, complaining that she got a lower-model loaner and didn’t receive a shiny new phone to replace her old one.

    I imagine this lawsuit will fail miserably. Unless she can prove that she absolutely was never handed any T&C–which is possible, but highly unlikely, because she almost certainly had to sign it at purchase time–then she doesn’t have a case. Ignorance to the contracts you agree to is your fault, not the other party’s.

    Is the month-to-month protection a good deal? Depends on how rough you are on your phone. In many cases, probably not. That doesn’t make it a fraud, though. No, this situation seems like it’s her own fault.

    • Bitz says:

      I do take issue with your claim that the sales person probably told her it was a refurbished phone. In no time, at Best Buy or any other store, have I ever been told I will get something refurbished. Salespeople generally don’t talk about the kind of product you’ll get back, they’ll just say things like “We’ll make sure you get a replacement,” or “We’ll keep you running,” to make you want to buy. Most people won’t question whether it’s refurbished or not if they’re caught in that pitch. It’s technically not lying to the customer, but I know for a fact that sales people at BB are trained not to give “too many details” so they don’t lose the sale.

  27. offtopic says:

    hard to believe that she never received the paperwork – if there is one thing that best buy is good at is pushing extended warranties

  28. offtopic says:

    hard to believe that she never received the paperwork – if there is one thing that best buy is good at is pushing extended warranties

  29. Buckus says:

    Was she forced to take an “Optimized” phone instead?

  30. Extended-Warranty says:

    Best Buy can never win.

    – Customer purchases warranty
    – Customer encounters problem
    – Best Buy replaces phone
    – Lawsuit

  31. scottd34 says:

    lol that phone dosent cost $199.99 unles youre due for an upgrade, if you dont have an upgrade its about $650. of course that would mean reading the price tag on the phone display as well as the web site since it is disclosed there.

  32. aleck says:

    If I were the judge, my verdict would be simple – “The fool and his (her money) are soon parted.”

  33. IntheKnow says:

    Salespeople are just that, not (legally) experts in the service plans.
    NEW “Customer Service” is the administrator behind the plans.
    If you think there is any other goal by BBY than to sell a contract and hide behind the terms and conditions, then you are wrong.
    ALL terms and conditions state “new OR refurb..” There is NO terms that state EXACT or even original value replacement, or even speed of replacement. Question is did she get the terms in store or mailed?
    Otherwise, “buyer beware” is a strong law. Class action will be settled anyhow as both NEW and BBY will prefer not to go to court.

    Fact is retailers and the entire service contract industry relies on a large percentage of dumb consumers to make dumb decisions.

  34. JenK says:

    $199 with a contract. $599 or so without. The woman is not very bright for signing up for the program and staying in it with no terms or conditions. Of course an insurance phone is refurbished…you’re not giving them a brand new phone, why should they give you a brand new phone back? Fail on the woman’s fault for not having the ability to reason. Fail also on the lawyer who agreed to take on the lawsuit.

  35. verdikt says:

    First of all there’s an option for us to email the agreement or physically give it to her. She prolly clicked email and when she swipes her card it asks if we handed the pamphlet to her. the $15 pays off. if your rough with your phone then it is really good. You just have to take 5 days sty the most with a loaner phone. Every other phone like Androids are $10. So quit complaining

  36. CappyCobra says:

    Sound like she had a failure of opening her mouth and asking for a copy. People are human even if they work at Best Buy.

  37. MrsTheStevens says:

    A lot of the posts are dis-ing this woman as not being smart enough to know the replacement plan is a bad deal. Well I’m going through the exact same thing. I bought a new cell phone (Android Incredible 4g) less than 3 weeks ago. I debated paying full price $600 or signing up for a new 2 year contract in exchange for a lower price. In the end I opted for the contract and the salesman’s pressure to buy the protection plan. A week ago I dropped my phone and went back to the store fully expecting to be able to walk out with a **NEW** phone–afterall, I had MY NEW $600 phone for only a couple of weeks. I was very surprised that they will be providing me with a refurbished phone which is “On Backorder”. Apparently the way this works is that as people turn in broken phones, a company begins churning out fixed/refubished phones. So I won’t be getting back MY repaired phone or a **NEW** phone but instead I’ll be getting back someone else’s repaired phone. The problem is that because the model is newly released, no one has turned in a phone to be repaired yet, so it is on “backorder” and my phone is sent in to wait…for how long no one can tell me. It has been a week so far. I’d love to join this class action law suit because the salesman lead me to believe that I would be getting a **NEW** not a **USED** phone should anything happen to my phone. How would buyer beware work unless the consumer simply decides all salesman are liers?