I have o2's Insure with my iPhone - £7.49 a month I think.
I am on my sixth iPhone for various reasons, mainly because I'm a clumsy fucker. I knew this when I bought it, hence the insurance. I haven't had one problem with the service - phone up, make the claim, they send you out a new phone with a courier and you give them the damaged phone. Excess is only £25. For me, it's worth it as I am a shit for dropping things.
I think I've made three claims with them, and each time it hasn't been a problem. The second time I did it, was with the original iPhone. It was at the time the new 3G one came out. They couldn't give me an original handset so told me they'd send me out an upgrade. When that was processed, and the iPhone was on its way, I popped into my local o2 store with the broken handset and upgraded it in store for a 16GB new iPhone. So I kept the 16GB iPhone for myself, gave the broken one to the courier in exchange for a new 8GB 3G handset to replace the broken one under o2 Insure, and put the 8GB 3G on eBay. Think it sold for just over £300. That pretty much covered any insurance payments I've made to o2!