Stolen Cell Phone: Who Pays the Bill?

The cellular phone — society’s quintessential example of luxury turned necessity. There are more than 250 million of them in America alone, and if history repeats itself, more than 600,000 phones will sit comfortably against the ear of cell phone thieves next year.

Feelings of violation aside, cell phone theft is a pricey proposition. Extreme examples showcase instances where the culprits rang up over $20,000 in charges (anyone who has ever gone over the monthly allowance knows how fast the charges can add up). Here’s the bad news: Most contracts make the owner of the phone responsible for all charges, including those made by thieves. Here’s the really bad news: Those charges are not likely covered by your homeowners insurance.

The reason is that when there is a loss or damage to personal property most home insurance policies are designed to cover losses resulting from “direct physical loss.” This means the policy will cover the cost of a new cell phone; unfortunately for victims of cell phone theft, charges resulting from the use of the stolen phone are not considered direct physical loss and are therefore not paid by home insurance.

Buying separate cell phone insurance may cover the cost to replace a stolen phone; however, like home insurance, these policies do not typically pay usage charges. The lack of adequate insurance coverage for this exposure should serve as a reminder of the importance of safeguarding your phone from thieves, knowing how to report a theft, and doing so immediately. David Bach, author of best-selling financial guide The Automatic Millionaire, offers the following tips to avoid being on the hook for a monster bill if your phone is stolen:

1. Use password protection

Most phones include a programmable password feature that requires a password to unlock the phone.

2. Call your provider the second you discover the loss

Most contracts make the owner responsible for all charges that occur before the loss is reported. Therefore the time of reporting could save thousands of dollars in unwanted charges. When reporting the loss, keep track of the date and time of your call as well as the name of the person taking the information; this could prove valuable if the provider continues to charge you after the report is made. Ask for proof in writing that your device has been disabled.

3. File a police report

While the likelihood of recovering your phone is not good, it provides an official record of the crime, which may be required by your cell phone carrier.

4. If you feel your provider is being unreasonable, tell them you request an investigation

This could help you avoid collections and delay reporting to credit bureaus. When you request the investigation, inform the provider that you are filing complaints with the FCC, your state attorney general’s office and your state’s public utilities commission.

5. If your provider continues to act unreasonably, contact the three resources mentioned above

Complaints can usually be filed by calling the consumer hotlines or through the website.