Elena wants to know if she should buy and extended warranty on her iPhone. Leo says that the new Apple Care, called Apple Care Plus, is beneficial because it covers damage. It's $100 (with a $79 co-pay) and it covers two incidents. Leo says that often, Apple will replace a broken iPhone for $200. So an extended warranty is a profit center for Apple, and Leo nevers buys it. In the long run, it's just plain cheaper. If Elena's the type of person who has butter fingers, Apple Care can buy peace of mind.
Leo doesn't usually recommend extended warranties because they're a pure profit center for Apple, as most customers just don't use it. However, Leo generally recommends it for portable devices because they're more fragile and she would get better service with it. She may end up paying a deductable, but it's probably worth it on an iPhone.
No, the standard AppleCare does not cover impact damage or accidental breakage. The phone company may, however. Leo has seen Apple replace broken phones for about $200. When bringing in a broken iPhone, he should make a genius bar appointment. The geniuses have a lot of flexibility, and may be able to help depending on the situation.