I have insurance and I protect my iPhone in an Otterbox case. I have had 3 of the 4 iPhones and have sold each phone for more then a new one is worth. So I have paid $300 for 3 iPhones.
As far as insurance goes get it through your homeowners or renters insurance. Insure it like a valuable piece of Jewelry or art. I pay about $20 a year to insure my phone. If "ANYTHING" happens to it. I can replace it for $50.