You will have to purchase your iPhone from Best Buy which offers coverage for it (but only for iPhone 3G). When you purchase the iPhone, you can subscribe to the Geek Squad Black Tie Protection service plan of Best Buy which will cost you few dollars per month, but will give you full coverage if your iPhone is damaged by an accident. You must know that this plan is good for 2 years.
There are many cell phone insurance companies like SquareTrade and SafeWare which provide accidental insurance coverage for iPhone. You should know that you have to buy the insurance plan from any cell phone insurance company within some specified days from the date of your purchase in order to avail the option.
You can also get the insurance coverage by contacting your home insurance or automobile insurance provider such as Allstate, State Farm and Geico. The insurance company will charge you a particular amount per month as insurance premium in order to provide you the cover for the accidental damage to your iPhone.