With contracts, if you break the phone you've still got to pay the bill. (Breaking your home phone doesn't stop BT charging line rental.) Having insurance means you're less likely to stop paying the bill for a busted phone on a connection you can no longer use.
Carphone Whorehouse tried to sell me Geek Squad when I bought my Nexus 7, then asked "can I just have your account number" when I paid with a credit card, and had to get the manager's permission to sell it without. Pfft, I was going to root it and invalidate the warranty straight away anyway.
If you use your phone, you can run Tor or VPN on it too so the BOFH won't know what sick shit you're into. (Although, for the sake of other users, don't suck assloads of bandwidth streaming video over Tor.)