According to Virgin Mobile, up to 700,000 mobile phones are stolen every year in the UK. The British Insurance Brokers’ Association calculates that phone users who buy cover from a retailer or operator typically pay between £95.88 and £119.88 annually to insure their handsets against theft, loss or damage.

So, if your phone is lost or stolen, you would expect the insurer to cough up. But you could find you are forking out for cover that is completely invalid.

One reader contacted Doghouse when his insurer refused to replace his damaged mobile, stating that his phone was not covered for theft, damage or loss.

This reader had not missed an insurance premium in more than four years but, because his latest mobile handset was upgraded by his mobile operator and not Carphone Warehouse, the retailer that initially supplied his phone, the cover was invalid. Carphone is now considering refunding his premiums.

Even where cover is valid you should still watch out for exclusions. Some policies do not cover the cost of calls made on your stolen phone. Most policies will also fail to pay out if your mobile is stolen while unattended in a public place and some insurers have used this exclusion to avoid supplying a replacement handset even if the owner was only momentarily looking the other way.

If you are dissatisfied with your insurer’s decision you can take the matter to the Financial Ombudsman Service.

Peter Staddon, technical director at Biba, says a standalone policy bought through a broker should cost around £25 a year, although this will not normally cover the cost of calls made on a stolen phone. Virgin Mobile offers handset insurance costing just £25 annually with a £25 excess. This also covers the cost of calls made after the phone is stolen, provided the theft is reported within 24 hours. Another option is to add your mobile to your home contents policy.

Of course the other nightmare if you lose your phone is losing all your phone contacts. Carphone will back up all your contacts for just £1.99 and most operators offer a similar service.

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