Q: Because of a recent uptick in property crime in our area, we’ve been thinking about installing a security system, but as new homeowners, every penny counts. Our neighbors told us that there may be a home insurance discount for security system installation. Is that really true?
A: In many cases, yes, it’s true! Your homeowners insurance company has a vested interest in protecting your home; every time a claim is filed, the company’s profit is reduced, so reducing the size and number of claims is important to the company. It’s so important that insurance companies are willing to offer an insurance discount for security system installation to help reduce premium costs for those homeowners who have installed some types of home security systems and devices.
It’s worth noting that renters insurance providers offer this type of discount as well. While renters may not have as much freedom to install equipment or add security to exterior doors in a multiunit dwelling, many of the best home security system providers like SimpliSafe offer equipment that can be mounted easily without damaging the walls and transferred to another rental when it’s time to move.
Most major insurance providers offer a homeowners insurance discount for security system installation.
While it’s nice to think that homeowners insurance companies are there to protect a home and its residents (and that’s certainly part of why they do business), home insurance companies are businesses, which means their central purpose is to earn money. To understand why these companies might offer a security system home insurance discount, it’s helpful to understand how homeowners insurance works.
Homeowners insurance companies sell policies to homeowners for an annual premium. In exchange, the homeowners insurance contracts to reimburse policyholders for damage caused by covered events, including weather, fire, accidents, vandalism, and burglary. Should one of these events occur and cause damage, the homeowner will pay a deductible (agreed upon before the contract is signed) and then the home insurance company will pay for the rest of the repair or replacement, subject to coverage maximums stated in the policy. It’s a great safety net for homeowners—and for mortgage lenders, who require that homeowners carry an insurance policy so that the lender can recover its investment if the home is destroyed or damaged beyond the homeowners’ ability to pay for repair. The biggest hope of every insurance company is that enough customers will pay more in premiums than the company has to pay out in claims, so preventing claims increases the companies’ profits.
Why do many of the best homeowners insurance companies offer a home insurance discount with security systems? First, security systems function as a very effective deterrent for burglars—80 percent of convicted burglars surveyed by the United States Department of Justice and the University of North Carolina indicated that they would avoid homes that appeared to have security systems. Preventing burglaries saves insurance companies money. In addition, home fires and weather damage cause enormous claims every year: Should a house fire destroy a home, an insurance company will have to pay out a claim that includes demolition, hauling away debris, planning and rebuilding the home, and replacing all of the contents. Monitored security systems or security systems connected to smart-home systems increase the likelihood that fires will be noticed and the fire department called sooner, while there’s still time to control the damage. In the end, homeowners insurance companies find that home security systems are worth it when it comes to saving them money on claims, and therefore offer a discount on home insurance with security system installation to encourage customers to install a system in their homes.
The exact discount will vary, and homeowners can check with their insurance provider to determine the details of the discount.
How much discount on home insurance with security systems can a homeowner expect? In general, homeowners can expect to save up to 20 percent off their premiums. The exact amount depends on several factors. Each insurance company has a different standard discount offering, so the first place to check is the policy documents a homeowner receives when they sign the contract. If wading through the document is too difficult (policy documents often have a lot of fine print), it makes sense to simply call the insurance company and ask. It’s likely that the discount will vary based on the level of policy the homeowner has and the type of system the homeowner selects.
In general, a home security system with professional monitoring will garner homeowners the largest discount.
For many years, security systems with professional monitoring were the only kind of type of security systems available. Professional installers would visit the home to mount keypads and sensors, determine where to place security cameras for the best view, and connect the system to monitoring stations via the telephone wire. The installation and monitoring service payments were expensive, so security systems were something that only wealthier homeowners could afford. The growth of wireless internet service spurred the development of DIY security systems that homeowners could install themselves and monitor though a mobile app. Recognizing the opportunity to increase their market, larger home security companies developed a sort of hybrid system: Customers can now in many cases choose professional installation with full-service monitoring, DIY self-installation with professional monitoring, or DIY installation with self-monitoring.
Why does professional monitoring garner the largest home insurance security system discount? Put simply, it’s because of the speedy response time professional monitoring can produce. If a fire alarm is triggered in a home, the homeowners will be primarily concerned with evacuating the home, and only after everyone is safe will they call the fire department. If the security system is monitored by professionals, the pros can call the fire department immediately, so help can arrive faster and the homeowners can focus on safely leaving the home. Similarly, if a window sensor or front-door camera triggers and suggests that someone has broken into the home while the homeowners are away, the monitors can call law enforcement to the scene at once, while a homeowner with a self-monitored system may not hear the notification on their phone. Self-monitored systems are still a great option, but homeowners insurance companies will provide larger discounts to homeowners who elect to pay the slightly higher cost of a monitored system because they feel those systems are more likely to prevent or reduce claims.
A local audible alarm may also earn homeowners a discount on their insurance premiums.
Regardless of the type of monitoring they choose, homeowners who have loud, blaring alarms connected to their security systems can also qualify for an alarm system discount on home insurance.This is because with a noisy alarm, everyone in range of the alarm essentially becomes a monitor who can summon the police. Loud alarms will deter criminals from continuing their break-in as they correctly suspect that law enforcement will soon arrive, so the alarm can successfully interrupt a crime in progress.
A note of caution with audible alarms: Some towns and cities have passed ordinances that penalize homeowners who have audible sirens if they have too many false alarms. It’s important that the sensitivity of the alarm be set correctly so that it will only trigger with a force significant enough to indicate a break-in: If the alarm blasts every time a bird flies into a window or a branch grazes the house on the way to the ground, homeowners could find themselves facing significant fines, not to mention annoyed neighbors.
Other security features that could result in a home insurance discount include deadbolts and smart-home devices.
The questionnaires required by homeowners insurance companies, along with the brief inspection most companies will carry out before offering a policy, include inquiries about the existing security features of the home. Some of these are focused on safety, such as railings on stairs, decks, and porches, which can allow homeowners to qualify for a reduced premium on liability coverage. Others look specifically at safety features that homeowners have installed to protect their homes from being burglarized. Front door security features, such as deadbolts, may allow homeowners to qualify for a reduction in policy prices when they’re installed on all exterior doors.
In addition, homes outfitted with smart locks including keypads, facial-recognition sensors, and sensor fobs can allow homeowners to qualify for an even larger homeowner’s discount for security systems when paired with secure deadbolts. In some cases, the insurance provider may not offer a discount for smart-home components, but it may offer a program that includes discounts on the smart-home devices themselves, so homeowners building a smart-home system will want to check with their insurance companies to see if they can access these discount purchasing options.
A home that has safety features such as smoke detectors, fire alarms, or sprinkler systems may qualify for an insurance discount.
Fires create truly catastrophic damage, which is made worse by the massive quantities of water introduced into a home by firefighters as they work to put out the blaze. Homeowners will want to install smoke and fire detectors regardless of whether or not their home insurance policy will offer a discount: These simple products can protect against loss of life, loss of the home, and loss of precious belongings. Fire claims are significant financial burdens. As a result, most homeowners insurance companies offer a policy discount of as much as 5 percent for homes equipped with tools that will provide early warning of fires: smoke detectors and heat detectors (some smoke detectors sense both heat and smoke, so fires that are smoldering but not producing significant smoke can still cause an alarm to sound) can earn a discount, especially if they’re hard-wired into the home’s electrical system. Fire alarms that sound loudly enough to be heard outside the home and sprinkler systems that can quash small fires before help even arrives can result in a larger homeowners insurance discount for alarm system.
Of course, to maximize the discount, smoke and fire alarms can be connected to a monitored alarm system so that assistance can be summoned more quickly.
Homeowners who live within a gated community may also be eligible for home security discounts on their home insurance.
Gated communities are hyper-focused on security. Requiring an access key or posting a guard at the gated entrance of the community prevents unauthorized people from accessing the community by vehicle, reducing the likelihood of large-scale theft, and the watchful eyes of a guard or neighbors provides a deterrent for criminals on foot who might linger or hang around in places they shouldn’t be. Essentially, homeowners insurance companies may offer a home security insurance discount to residents of gated communities simply because the homeowners association affiliated with the community has chosen security as a priority for the neighborhood, presuming that the residents have all chosen to live in the community (and paid somewhat exorbitant fees to do so) because they, too, are very security conscious.
A home security system can deter theft, so homeowners are less likely to need to file a theft claim that can make their insurance premiums increase.
Homeowners insurance companies may offer a security system home insurance discount on premiums because the customer has a system installed. But there’s another cost-savings benefit to homeowners who make this choice. Premiums are set for each policy based on a collection of information: The size of the home, the value of the contents, and the policy payout terms are all elements that the customer can select, but another key component is the number and size of claims the customer has filed in the past. While it seems a bit unfair to most homeowners—after all, they’re paying for the insurance, so it seems wrong that they might be penalized for using it when they need to—the fact of the matter is that those who have filed multiple or large claims in the past are seen as a bigger risk to the insurance companies, so their policy premiums will be set higher than those who haven’t filed claims.
Visible signs of home security systems deter thieves from striking. If they choose to break in anyway, a loud siren or the imminent arrival of law enforcement may drive them away before too much damage is done. This reduces the number and size of claims filed on a homeowners policy, and thus reduces the risk the customer poses to their insurer, which helps keep the premiums lower.
While the discount likely won’t be enough to cover the cost of the security system, it can help homeowners offset their costs as well as give them peace of mind.
Will the discount offered by the insurance company for a security system equal the cost of the security system? Probably not, although it might offset the cost enough to make an equipment upgrade or monitoring essentially free. On the other hand, for homeowners who are interested in implementing home security tips to protect their homes and families, the discount can make installing a system financially accessible when it might otherwise not have been. The peace of mind that comes from knowing you’ll have time to react in the event of a break-in or fire, especially if the system is professionally monitored, can’t be overstated. The security system discount on homeowners insurance is really icing on the cake.
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