Will a "Smart Home" Save You Money on Homeowner's Insurance?

Thu, Jul 23, 2015 @ 08:07 AM Karina Gafford Renting/Buying a Home, Home Maintenance

Here’s some irony for you: I’m typing this blog you’re reading on my ChromeBook wondering if Google is stealing my words as soon as I tap them out, and yet I’ve just researched ways that I can pay Google to know absolutely all of my patterns of life by turning my home into a "smart home."

A smart home could potentially help save my family in the event of a gas leak by shutting off the source of the leak and alerting the fire department. It could unlock the door to my home to allow access to a guest if I’m running late and help me save on energy costs by turning off lights in the home when it senses no motion; after all, a certain someone in our household has a habit of leaving a light or two on after we go to bed. What military family doesn’t want to save money on their electricity bill?

That sounds so convenient and, pardon the pun, smart. 

But, do we really want Google to have that much access to our lives just to save a buck? 

It’s scary to think of giving even more access to our lives to global corporations such as Google with their Nest, Apple with HomeKit, Vivant, Phillips, ADT with Pulse, Lowe’s with Iris, and even Amazon with their foray into the smart home through Alexa, the intelligent personal assistant. If, however, we blithely accept the fact that Big Brother has won, we could at least consider one of the other advantages that a smart home could offer us: You could save money on your homeowner’s insurance.

The companies selling the smart home devices love to tout how the savings will simply add up. One company whose services shall remain unnamed even suggested that the amount you could save on your homeowner’s insurance might even pay for the cost of the smart system itself! 

While it’d be an awesome boon if your homeowner’s insurance savings could begin to cover the cost of purchasing these systems, they don’t.

That doesn’t even factor in the monthly maintenance costs on many home automation systems. Tech guru websites predict that it’ll be at least 2019 before any real savings are realized by homeowners through their insurance policies because, they explain, the systems are too new and don’t have sufficient standardization for their risk assessment departments to calculate across the board savings estimates. 

State Farm suggests that savings are possible. They state that “Home automation and security savings of up to 10% may be available to State Farm customers who buy a discount eligible system.” Note that it states “of up to 10%,” that doesn’t mean you’ll actually save 10 percent.

In a discussion with a USAA Property Insurance representative today, the representative explained that savings for home automation do exist, but they’re small.

There is a nominal savings for having both fire and security automation, but no additional discounts for systems such as carbon monoxide detectors currently exist. He suggested that there may be discounts in the future, but not at the moment. Right now, the mobile controlled security systems give the best discount that they offer. 

So just how small are the discounts?

On a homeowner’s policy that we calculated for approximately $250,000, a little over the average home sale price now in the U.S., the annual insurance cost without these systems came to $2,060. The cost with these systems came to $1,980, representing a savings of approximately $80 per year. 

The average cost of the monthly maintenance for the smart home security system for the home’s location, however, came to roughly $50 per month. The homeowner’s insurance would then help to cover the cost of only 1.5 months of annual coverage, and that doesn’t include the cost of purchasing the system itself.  

So for now, check out the options that are available for your family, but before you make big investments in home automation systems, just make sure you’re aware of these three important takeaways:

  1. You won’t save enough on your homeowner’s insurance to cover your smart home installtion and maintenance costs in 2015.
  2. The smart home device industry expects considerable flux in device compatibility over the coming few years before they settle into standardization, so watch your investment dollars in these systems as your current or new devices may not be compatible with systems in the near future.
  3. Smart homes aren’t yet entirely widespread and are just now trickling down from the high-end homes. Therefore, if you’re installing a system in your military family’s home, then it may be what you need to help your home stand out in the resale market when you PCS.

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