I'm sure somewhere in the form to obtain insurance it states you have a working phone in your possession. If so, and you said yes, but you didn't, it would be considered insurance fraud.
I'm also sure, that if more people did this, insurance would raise for those who are honest and pay their insurance premiums; whether they make a claim or not in the future.
Most insurance companies do not care how long you have had insurance with them. As with many things in life, insurance is one of those things you pay for and yet, hope you never need. Phone insurance, car insurance, house insurance, etc., are items man of us pay for most of our life and hope we never have to make a claim. (Life insurance is also something we pay on, but in the end, WE don't make the claim; someone else does.
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If you cannot afford the extra money for the new phone without canceling insurance, then don't purchase the phone. Understand fraud is fraud and to lie on a claim is being dishonest.
And yes, I am in law enforcement, and yes I have insurance on my phones. Have had insurance since my first cell phone, and only made one claim, years ago, on a phone that fell over 500 feet down a cliff side. But I was able to sleep that night after making the claim.
Sorry for the long discourse, this will be my only post on this thread; however, I really have a problem with people who want others to pay for their dishonesty, and those of us with insurance end up paying for those who try and get around paying their fair share.