You don't need Applecare+ to return it for a replacement.....but if you want the 'express shipment' option (IOW, they send you a replacement first and THEN you send them your phone) without paying $29, you'll want to pay for it.
Some people recommend it, some don't. I've never needed it before, but said "Eh, what the heck" when buying my 5.
I'm glad I did. First one had a faulty home button; called Applecare at about 3 p.m. on Wednesday and I had one AT MY DOOR by 2 p.m. the next day. Not too shabby.
What is shabby, however, is the fact that the Lightning port on my replacement iPhone is faulty. My original iPhone 5 had to darn near be completely disconnected from the Lightning cable to lose a connection with the computer or charger...whereas the one I have now (a re-replacement LOL is on the way) will connect/disconnect at will unless I plug it in and leave it COMPLETELY still.
Still can't complain, though; I've owned 2 iPhones, 2 Mac Minis, an iPad and 2 iPod Nanos and aside from a bad hard drive, this is the first time I've ever had any issues. For my troubles I'm getting sent a free Lightning USB cable.
Anyways - had I had to wait for my replacement phone until I sent them my phone, I'd be out a phone for a week or two; that's a no-go for me; and if I wanted to pay $29/incident, that's almost $60. So the $99 I paid was worth it, IMHO.