Smart home devices that can cut your insurance premiums
Providence Journal (RI)
The smart home devices that homeowners are installing in their homes for security or to keep an eye on their pets may do more than provide peace of mind: They can cut your insurance rates. Smart home devices may be able to cut premiums by 10% to 15%, said Pat Howard, senior editor at Policygenius, who also is an insurance agent. That could mean a savings of $100 or more a year for many homeowners, partially offsetting the cost of the devices. "Protected devices make your home safer," he said. "Insurance companies will offer credits and discounts." There is no hard-and-fast rule on how much a homeowner can save. It depends on an assortment of factors such as the insurance company, the types of devices the homeowner is using, current credits and discounts the homeowner is current getting, and the state where the policyholder lives. Not all companies offer discounts and not all devices are eligible for discounts.
"They're not widespread, but they are becoming more and more common," he said of the smart home discounts.
Columbus-based Nationwide, for example, has a policy that can offer up to a 10% discount that is applied to home, water and theft perils in most states. Policyholders also can get a 50% discount off of some kits from Notion, which makes smart home monitoring systems that homeowners can install.
Insurers recognize there is value in teaming up with companies that make these devices that can prevent losses, said Sarah Jacobs, Nationwide's vice president of personal lines product development.
"If we can save money on claims, we can pass that along to consumers," she said.
Nearly two-third of homeowners own at least one smart home device, but many don't realize that the devices can cut their insurance premiums, according to a Nationwide survey of 1,500 homeowners last August.
A 2020 survey by Policygenius, an online insurance marketplace, found that 40.4% of homeowners didn't realize that installing a security system in their home could cut their premiums.
Video doorbells, home security cameras and smart thermostats are the most popular items, the Nationwide survey showed. Other devices monitor water leaks, smoke and carbon dioxide alarms, and doors and windows.
Nationwide partnered with Notion in 2020 to offer technology that homeowners can use to do such things as watch the home for open doors and windows, smoke and carbon dioxide alarms, and water leaks with a cellphone.
State Farm, the state's largest homeowner insurer, says it provides for fire, smoke or burglar alarms or any other home monitoring system. It does not offer discounts for water leak detection system.
Smart home devices
can catch water leaks
While customers are aware of video doorbells and other home security devices, there's not as much focus on devices that can prevent what is among the costliest of insurance claims: water leaks.
The Nationwide survey found only 7% of homeowners use smart sensors that monitor for water leaks. Just 27% say they know about sensors that monitor water flow and leaks, and 24% are aware of sensors that can shut off the water in case of leaks.
Water is the third-leading cause of homeowner insurance claims, with an average of $11,098 per claim, according to the Insurance Information Institute, an industry group.
Nationwide says the water sensors can reduce premiums by 4%, a savings of $50 to $55 per year for many policyholders, Jacobs said.
"People think security is the most important," Jacobs said. "From a claims perspective, it is eight times more likely to have a water loss in your home."
Over time, the savings can offset the cost of the sensors, she said, though many homeowners get smart home devices for peace of mind.
The cellphone that warned
of a gushing hot water tank
Michelle Hancock, 53, of Monroe, Washington, near Seattle, was on her way to a five-day camping trip when "My cellphone started freaking out," she said of the alerts she was getting from the app on her phone. "It's telling me there is water in the house."
Hancock installed the Notion system in her house in 2018. The system consists of a series of sensors – each about the size of an Oreo cookie – that she placed around pipes and her hot water tank.
She was able to call her daughter, who went to Hancock's home, found water spewing from the hot water tank and shut off the water.
Without the alarm on her phone, Hancock wouldn't have known what happened to her water tank until she returned home days later.
That leak would have caused at least thousands of dollars of damage in her 1,200-square-foot basement and put generations of family photos at risk.
"People don't understand water. It's very insidious," she said.
Hancock, who owns an insurance agency, put the devices in place to begin with as a way to keep her pets safe. She had not considered the possibility that the devices could save money on her premiums.
She said a client had a house fire that killed the client's pets.
"It resonated with me very quickly. Oh my gosh, no one would know," she said.
If there was an alert on her phone that a smoke detector had gone off, she could hurry home or have a neighbor check or call the fire department.
The Notion system doesn't detect smoke, but it does hear the smoke alarm and will activate the app on her phone, she said.
"If you can prevent these losses, it affects things on a far grander scale," she said.
In the case of water, a homeowner may not notice if a toilet, faucet or a washing machine is leaking. The devices also can detect a big drop or increase in temperature in the house, a possible sign of a busted furnace that could cause pipes to freeze and burst.
She also has installed similar sensors from Roost and has a Ring Doorbell that activates her phone when someone comes to the door.
"I could not be a huger fan of these devices," she said. "I just wish we would get them in the hands of more people."
How to get discounts
on home insurance
Research has shown many homeowners don't fully understand how homeowner insurance works and what drives rates, said Howard, the senior editor at Policygenius. They also tend to stick with the same company.
Howard warned that there can be nuances when it comes to the devices and their eligibility for discounts.
Insurance companies distinguish between a house with a video doorbell, for example, compared with full security system with central monitoring when it comes to discounts, he said.
There also might be better ways to save money, such as raising the deductible, bundling home and auto policies, or shopping for a new policy, something that Howard recommends that homeowners do every year.
"Homeowner insurance tends to be a set and forget it kind of thing," he said.
So before buying any smart home device, homeowners should check first with their insurer to see if the company offers any discounts for installing them or has a partnership with a device company such as Notion that could offer products at a reduced price. Insurers also may be able to provide advice on what products work best, he said.
"You don't want to be investing in something that doesn't do what you want it to do," he said.
Regardless of obtaining a discount or not, the devices will grow in popularity with homeowners, he said.
"People love locking the front door from the Bahamas or adjusting the thermostat," he said