If you're tempted by the new Apple iPhone or any other mobile, then think twice before taking the insurance being offered with it.

O2, the network for the iPhone, is charging a hefty £7.50 a month for cover. That's £90 a year for a £269 phone.

This insurance is supposed to cover loss, theft, breakdown or fraudulent use. But is it worth it or is this yet another case of consumers being landed with over-priced and often worthless insurance?

The cost of mobile phone insurance far exceeds most other types, in proportion to the value of any compensation you might receive.

Graeme Trudgill, from the British Insurance Brokers' Association, says: 'Think about all your options before taking insurance. It is expensive in comparison to what a phone is worth.'

First, check whether the handset will be covered under a home insurance policy or a warranty. If it is, there may be no need to take out separate cover.

Most of the major insurers, including Norwich Union, Churchill and Direct Line, will cover your handset on your home insurance if it is lost or stolen. You must have cover for personal possessions outside the home and must not have been negligent.

Even if your phone is free with a contract, your insurer should still replace it.

Your phone is likely to come with a warranty for the first year - resort to this if it breaks.

Most contracts can also be switched to another phone, so if the phone does break you could buy another cheap one or use an old handset.

If you are close to the end of any mobile phone contract when yours is lost or broken, you may well be offered an upgrade to entice you to stay.

In the case of an iPhone, you can buy a new iPhone and attach it to your existing contract.

The advantage of mobile phone insurance over other types is that it covers fraudulent use.