Buying a new wireless phone typically means hearing a sales pitch for cell phone insurance. It sure sounds reasonable. "Peace of mind for that important device that might be lost or stolen," says the sales rep.

But many consumers later find their insurance policy isn't everything they thought it was.

"The U.S. Cellular representative suggested that I needed insurance because the phone was expensive. I figured it wasn't a bad deal for an additional $5.00 per month, so I agreed and signed the paperwork," says Riki of Madison, Wisconsin.

When his phone's speaker was damaged, Riki called his insurer -- The Signal -- and was told that although his model of phone had been discontinued, he would be sent a comparable phone with the same features.

"I constantly use the MP3 feature on my phone, so it was very important the replacement phone have this feature," he said.

Riki received his replacement phone and was shocked to discover it was nothing like his first one.

"The replacement phone didn't have external memory, radio or voice recording, and it didn't even have an MP3 feature, the one thing that The Signal promised I would have."

Contacting the cell phone company usually won't help because the insurance policy is between a third-party insurer and the cell phone owner.

"I called US Cellular and they agreed that I should have at least received an MP3 phone, but there are limits to what the carrier can do because the policy is with another company," says Riki.

He again called The Signal and this time spoke with a supervisor.

"She explained that if they do not have the same phone as a replacement, they could send whatever phone they wanted and if I didn't like it, I could purchase a new phone."

Not Uncommon

In fact, what Riki experienced isn't uncommon because most policies state that a replacement phone might be a different model. Additionally, most consumers don't take the time to read the small print and seldom will a salesperson tell you all the details.

For instance, some policies won't cover a device such as a Treo or BlackBerry, but to know that you would have to read the policy which will tell you to visit the website of the carrier for a list of "ineligible" devices.

Furthermore, the policy will include the amount of your deductible, something that many consumers aren't aware of until they file a claim.

In Riki's case, he paid his premiums for 14 months and then paid a deductible, ending up with a replacement phone nothing like his previous one. He comments, "I've warned my family about this fiasco because they are paying for insurance just as I was."

Most carriers will give you at least fourteen days to decide if you want insurance, so don't be rushed into a decision that will come back to haunt you.

Like extended warranties, phone insurance may wind up being worth a lot less than you pay for it.