Correct. From what a lot of users here have told me, Apple will replace your iPhone for $199, regardless of what's wrong with it. You can be in or out of warranty and still get a new one for $199. This includes physical damage, cracks, smashed, etc... The only thing they won't cover, from what I understand, is if the iPhone is in a million little pieces. But if it's smashed, they will still do it, as long as it's not in multiple pieces.
sounds good to me.. better than paying over $7xx for a new one. I will keep the insurance for piece of mind Verizon has been good to me with warranties when I had continuing issues with my blackberry storm when it first came out