Have you ever had that panicked feeling after leaving your home and wondering if you locked the back door or if the stove is still on? With the widespread adoption of smart home technologies and the Internet of Things (IoT), you can check to see if your home is secure and calm your mind.
IoT devices can help you mitigate risk, and, unlike previous years, they are no longer toys for the techno-geeks. Insurance companies are starting to pay attention to IoT devices because they sense disasters before they happen. Because of this, major insurance companies are offering home insurance discounts to homeowners that use smart alarms and other home security measures. When you level-up your insurance security measures and lessen the risk of fire, theft, or water damage, you also protect your home and save money.
The Impact of IoT Devices on Insurance Premiums
Risk management is fundamental. If your home is a greater risk to insure, then you are less likely to pay less. Smart devices place home protection in an entirely new paradigm. Instead of reactive home protection (like filing a claim after a home becomes damaged), smart devices allow for proactive protection (like being notified of potential damage before it occurs). Below are three devices that can help lower your home insurance premiums.
The Smart Water Leak Sensor
Water damage is a serious risk that claims a lot of home insurance every year. The Insurance Information Institute states that every year one in sixty insured homes experience water damage to their property. Smart water leak sensors can monitor potential leak locations and are, therefore, a great insurance protection tool. If sensors detect something, they will notify you on your smartphone. Some advanced leak detection devices, such as Flo by Moen or Phyn, can even detect a leak, to the point of being catastrophic, and shut off your home’s water.
Smart home technologies help mitigate potential damage to homes. Big insurers like Nationwide and USAA promote these smart devices because they help avoid huge payouts (e.g. $15,000 flood claims). For example, Nationwide has a smart home program that incentivizes customers to install leak detection devices by offering a 10% discount on flood, fire, and theft insurance.
Smoke and Fire Detectors that Work with Other Smart Tech
Regular smoke detectors are not enough. Smart smoke detectors (e.g. Google Nest Protect, Roost) notify you when they go off (via an audio alert/other alarm) so you can call 911 and prevent a fire from becoming a disaster.
Some insurance companies have programs that provide smart smoke detectors at no cost. For example, State Farm has provided over one million free Ting Sensors to eligible customers. Ting Sensor smart plug fire detectors monitor for electrical fires by scanning for micro-arcs and electrical sparks, which regular smoke detectors do not alert you to.
Smart Security Systems
Another issue concerning smart home technology is burglary. Smart security systems like video doorbells and smart locks are effective at preventing homes from being broken into. A study from the University of North Carolina found that 60% of burglaries said they would find another home to rob if they saw an alarm system.
Insurance companies understand that alarm systems reduce the risk of a home being broken into. Research from NerdWallet showed that home insurance companies offer a 20% discount on home insurance policies for homes that have a security system that is monitored. Companies like Allstate offer a 5% discount for customers that have smart security cameras or door sensors and those customers may qualify for additional savings if they have professional monitoring.
Real-Life Savings and Prevention
While having an alarm system provides additional savings, the most valuable aspect is the tragedies that are averted.
State Farm has a program that tries to identify and limit the risk of home fires. In one month, this program managed to find and mitigate 250 fire hazards. In one example, a homeowner got a notification for a dehumidifier that was faulty and had an arcing signal that was potentially dangerous. The homeowner unplugged the dehumidifier before it could catch on fire, and this action was able to prevent a fire that could have destroyed their entire home.
From a savings perspective, the numbers add up. Discounts may differ by state and carrier, but Hippo Insurance says customers using smart home monitoring systems save $64 to $91 annually. Over a 30-year mortgage, that’s thousands of dollars. Plus, you’re saving on deductible payments by preventing damage in the first place.
Selecting Devices to Achieve Insurance Discounts
Not every smart device will reduce your bill. Sure, a voice-controlled speaker, smart fridge, and other gizmos are nice, but in the underwriter’s eyes, those don’t mitigate risk. To get the most out of your insurance, adhere to these guidelines:
Target “Peril” Reduction
When addressing the three common insurance perils—Fire, Water, and Theft— choose devices that reduce risk.
For Water: Look for major platform-compatible whole-home shutoff valves or point-of-leak sensors.
For Fire: Go for monitored smart smoke detectors or electrical monitoring sensors like Ting.
For Theft: choose systems that include deadbolt monitoring and outdoor cameras.
Monitor vs. Self Monitor Systems
Understanding the difference between these two terms is important. Self-monitored systems send notifications to your phone. Monitored systems (usually referred to as professionally monitored systems) send notifications to a monitoring center where automation can be used to call police or fire services if there is no response. Insurers offer higher discounts for professionally monitored systems because these systems guarantee police/fire response while the insured is in the air or asleep.
Confirm Partnership Programs
Before you purchase hardware, visit your insurer’s website. Insurers have partnerships that allow for two types of savings: one for the hardware and one for the insurance premium. Nationwide has partnerships with LeakBot and Phyn. State Farm has partnerships with ADT and Ting. USAA has partnerships with Resideo and Roost.
Is Your Home Smarter Than Your Policy?
Combining smart home devices and insurance is one of the few win win opportunities in today’s world. You get a home that is more secure and responsive. Your insurer avoids paying for catastrophic damages. You get peace of mind knowing that your family and property are safe, and you also get a lower monthly premium.
To ensure that your home is equipped with the latest smart safety devices, contact your insurance agent to obtain a list of devices that are approved for use, as well as information on potential discounts. Investing in smart devices such as a water leak sensor or an alarm may reduce your insurance premiums and potentially avoid stress and financial losses in the future. These devices may also be eligible for discounts with your insurance provider.