They do. If you were to accidently break your phone w/o applecare+, they offer you an Out of Warranty replacement for $199. By far the most economical choice and really makes applcare+ less appealing.
ok, but then why did moosquared pay $250:
The $49 replacement is for the applecare +.
Made the mistake of purchasing just regular applecare, and when I broke my iPad, had to pay $250 to get it replaced.