Are Smart Device Home Insurance Discounts Worth It?

Are Smart Device Home Insurance Discounts Worth It?

As an increasing number of insurance companies have partnered with smart device makers, purchasing a smart device is a handy way to save on insurance costs. But savings are ultimately minimal and shouldn't drive homeowners' choice of insurance company.
Smart Devices and Home Insurance

Smart home devices are becoming an integral part of homeowners' lives. In fact, the day after Christmas, Amazon announced that its Echo, Echo Dot and Alexa Voice Remote devices were its best-selling devices this holiday season. But smart devices aren't just a way for turning off lights and making playlists. In combination with a home insurance policy, they can also save homeowners some cash while increasing home safety.

Homeowners should always be on the lookout for how safety discounts with their insurer of choice can save them on their policy, particularly if a partnership with a smart device company yields particularly large savings. However, in many cases, we found that smart device discounts are minimal as a percentage of total home insurance premiums. Our sample calculations for the Amazon and Travelers deal resulted in home insurance premium discounts of approximately 3%, which would save shoppers just over $30 per year when applied to the nationwide average annual premium of $1,083.

Perhaps more importantly, the discounts offered for centrally monitored safety devices are almost always larger, meaning homeowners looking to save are better off installing traditional centralized alarm systems than purchasing smart devices. If homeowners are looking to purchase qualifying smart devices anyway, they should take advantage of the discount, but these deals shouldn't be a major reason to select one insurance policy over another.

Travelers and Amazon: The Latest Home Insurance and Smart Device Partnership

The latest insurer to unveil a home insurance and smart device partnership is Travelers. In the last quarter of 2018, the carrier announced a partnership with Amazon to provide policyholders with a free Amazon Echo Dot and the opportunity to purchase smart home kits at discount prices, all while saving on your home insurance premium. If homeowners are already planning to buy a Travelers policy and are looking to enhance home security with smart devices, it's certainly worth taking advantage of this deal. However, our view is that the savings in this deal are not worth homeowners going out of their way for. We have four main takeaways for homeowners in relation to this deal. With exceptions for specific companies and partnerships, these points generally apply to most of the insurance and smart device deals we researched.

Amazon and Travelers Smart Kit deal takeaways...

  • Discounts to home insurance rates from the smart devices are highly variable, but small. For Travelers' smart device deal, we found them to be approximately 3% of annual premiums on average. The dollar savings will depend on homeowners' overall cost of home insurance.
  • The discount to total premiums is highly dependent on the type of risks a home is exposed to. If, as is common in some regions, an insurer puts greater weight on the risk of water damage than the risk of theft, smart devices that mitigate water risks will have bigger savings than security cameras.
  • Centrally monitored devices get better deals. Discounts to premiums from smart devices are often lower than the discounts garnered from traditional monitored alarm device equivalents, like central burglar alarms.
  • Discounts mitigating the same risk rarely combine. If you already have a central fire alarm, there is little monetary upside to buying a smart fire alarm or temperature-monitoring device.

There are two deals related to Travelers Insurance and Amazon for Smart Devices. One is a free Amazon Echo Dot for new and existing customers. The other is a discount on smart home kits purchased through Amazon, and the associated savings policyholders may receive on their home insurance. These deals, and how they affect home insurance quotes, are discussed below.

Free Amazon Echo Dot for Travelers Home Insurance Customers

Existing Travelers home insurance policyholders or shoppers purchase a new Travelers home insurance policy are eligible to receive a free Amazon Echo Dot (a retail value of $30) with their policy. This deal is currently available on qualifying homeowners policies in 25 states and is set to expire at the end of 2019, though it has been extended beyond previous expiration dates before. If homeowners are in the process of purchasing a new home insurance policy and are already considering Travelers, they should be sure to take advantage of this deal.

Qualifying states for Amazon deals

  • Alabama
  • Arizona
  • California (limited to first 15,000 customers)
  • Colorado
  • Connecticut
  • Idaho
  • Illinois
  • Iowa
  • Kansas
  • Kentucky
  • Maine
  • Minnesota
  • Mississippi
  • Missouri
  • Nebraska
  • New Jersey
  • New Mexico
  • Ohio
  • Oregon
  • Pennsylvania
  • Tennessee
  • Texas
  • Utah
  • Virginia
  • Wisconsin

Smart Device Package and Homeowners Insurance Discounts

New and current Travelers policyholders may qualify to receive a discount on the purchase of smart home devices when they buy one of three Smart Kit packages on Amazon. These savings—ranging from $30 to $40 on smart devices—are currently available in the same 25 states as the Echo Dot deal, but unlike that deal, there is no limit for customers in California.

Amazon and Travelers have steadily increased the number of qualifying states since initiation, and that trend is likely to continue. The offer is set to expire at the end of March this year, but that deadline, too, has been extended beyond previous expirations. Purchasing a kit can get policyholders a discount on their homeowners insurance premium, too, but these savings are variable, depending on the customer.

Amazon smart kit packages…

Retail value
Discount price
Smart KitEcho Dot, Wyze Camera, SmartThings Hub and SmartThings Water Sensor$166$135 (-$31)
Smart Kit PlusEcho Dot, Wyze Camera (2), SmartThings Hub, SmartThings Water Sensor (2) and SmartThings Motion Sensor$237$198 (-$39)
Smart Kit PremierEcho Dot, Wyze Camera (2), SmartThings Hub, SmartThings Water Sensor (2) and SmartThings Motion Sensor (2) and Ring Doorbell$362$320 (-$42)

The kits help homeowners to manage threats posed by three common home perils: theft (through the cameras and motion sensors), fires (through temperature monitoring) and water and flood damage (through the water leak sensor). Travelers customers who purchase these items through Amazon get savings on the Smart Kit, Kit Plus and Kit Premier of approximately $31, $39 and $42, respectively, versus retail prices.

The discount to homeowners insurance premiums is less certain. Travelers suggests customers call in to its customer service contact line to obtain a home insurance discount after installation of the Smart Kit. But there is no fixed rate for these discounts, which can vary widely by state and home.

To get some more concrete numbers, we looked at a rate filing for a Travelers home insurance policy in Utah. Using this filing, we found the biggest contribution Smart Kits make to savings on a sample home insurance premium is through the devices that protect against water damage, such as the SmartThings Water Sensor with automatic water shutoff functionality. Other devices in the Smart Kits, such as cameras and motion sensors, won't provide a bigger discount than you would already receive with a regular burglar alarm.

Either way, savings on a homeowners insurance premium from an Amazon Smart Kit will likely be minimal. We found that discounts to base rates from devices in the Smart Kits would amount to just over 3% of a sample homeowner's annual premium. However, having traditional monitored alarm devices—such as central theft, fire and water sensors—results in slightly bigger savings, about 4%.

Discount to base rate
Savings on sample base premium of $1,193…
Smart Kit cameras and smart water shutoff3.1%$37
Central smoke alarm, fire alarm and water sensor4.4%$53

Base rates and premiums are examples from a home insurance filing with Travelers in Utah, but actual rates will vary based on a variety of other factors, such as location, construction type and age of home.

For example, a central burglar alarm discounts your theft premium at five times the rate that a smart burglar alarm—the motion sensors and security cameras—does. The following table gives you a better idea of how these discounts work.

How perils contribute to a sample home insurance premium…

Water damage caused by weather$72
Water damage not caused by weather$278
Water backup$16
Total home insurance premium$1,193

The table shows how base rates for individual perils sum to a total home insurance premium. These rates are subject to a variety of adjustment factors, but the example rates hint at how discounts may affect the total cost of a policy. With Travelers, a smart burglar alarm discounts your theft peril by 1%. With these base rates, theft only accounts for $48 of your total premium; meaning a 1% discount saves you approximately 50 cents. A central burglar alarm discounts the same peril at five times that rate (5%), saving you about $2.50 on your home insurance premium.

With Travelers Utah base rates, the effects are more pronounced for water sensors, as non-weather water damage makes up a bigger share of the total premium. For example, having a central water sensor with a smart water shutoff applies a 15% discount to your non-weather water damage rate. In this case, savings come out to $42 on your total premium. However, different types of houses in various locations will have differing base rates for each peril, and the total value of your discounts will depend on the rates assigned to a home. For this reason, homeowners should always get a sample quote with insurers, as discounts may be highly variable.

Shoppers should note that discounts often won't combine because of overlapping functionality. For example, if a home has a centralized fire alarm, it won't get a bigger discount for having a smart smoke detector, too. But there are exceptions: With Travelers, discounts for having both a central water sensor and smart automatic water shutoff device can combine. When talking to an agent, homeowners should ensure that they take advantage of all discounts made available by their devices.

Other Insurance Company Discounts for Smart Devices

The Travelers deal is not unique in the insurance world. In recent years, a variety of home insurance companies have begun to partner with, or even invest in, smart device companies. In the hopes of increasing customer safety and lowering the risk that policyholders will make claims, these insurers are offering discounts and deals on devices that help maintain a safer home. Our takeaways are similar to those from the Travelers and Amazon deal, though in the case of Liberty Mutual, we were able to find some evidence of increased discounts for sponsored partnerships.

General smart device and home insurance takeaways...

  • The size of a discount will be highly dependent on how risks are weighted for individual homes. If you live in Florida and non-hurricane risks represent a small share of your overall premium, your discounts from smart devices will be commensurately small.
  • In some cases, branded partnerships for alarm devices may indeed provide notably larger savings on home insurance premiums than generic smart device discounts, as shown by Liberty Mutual's partnership with Vivint.

First Community Insurance and Roost

For example, First Community Insurance Company, a subsidiary of Bankers Insurance Group, is one of many insurers to partner with Roost, a smart home device company, to offer a Smart Water Leak and Freeze Detector for policyholders. Unlike with Travelers, homeowners don't buy the device but rather borrow it for the duration of their policy. Similarly to Travelers, the discounts to your home insurance policy are variable and likely won't be as high as advertised. We looked at insurance filings for First Community in the state of Florida and found that the discounts for a sensor-based water leak detection system are limited, on average.

Example: Calculating First Community premiums with a smart device discount
Average non-hurricane base premium$572
Average hurricane base premium$1,057
Average total premium$1,629
Discounted premium with water leak device$1,600 (-1.8%)

Here, we've made our calculations based on the average hurricane and non-hurricane base rates in the state, which combine for your total premium. The water leak device discount is 5%, but it is applied to the non-hurricane base premium ($572), resulting in savings of about $29. For this reason, it's always worth asking about available discounts, as your location or characteristics of each house will have a unique base premium and discounts will vary higher or lower, depending on those factors. Homeowners in Florida, for instance, with a higher non-hurricane base rate will get a much larger discount.

Liberty Mutual and Smart Home Devices

One of the most active major insurers in this space has been Liberty Mutual, which offers customers deals related to a multitude of smart device companies. Like Travelers, Liberty offers deals on cameras and motion sensors, but Liberty also offers savings for smart locks and smart smoke detectors. The offerings available are listed below, though shoppers should note that discounts may overlap. For example, both Vivint and Canary focus on home security camera devices, helping to guard against theft, and a homeowner would not obtain multiple home insurance discounts utilizing both deals.

Liberty Mutual smart device deals…

Smart device company
What is it?
What are your savings?
Vivint service planA one-stop company for smart home needs$100 off activation costs for a Vivint service plan and a free smoke detector. The devices you purchase may also qualify you for Liberty Mutual's protective devices discount on your home insurance premium.
August smart lockA smart lock that lets you lock and unlock your door from anywhere$100 off the smart lock device and up to 5% off your home insurance premium.
NexiaSmart home devices, including alarms and water sensors$100 on select Nexia devices in eligible states and potential savings on home insurance premium through smoke, entry and water monitoring devices.
Nest ProtectA combined smoke and carbon monoxide detectorA free Nest Protect ($99 retail price) and any applicable safe devices discounts to your home insurance premium.

After talking to a Liberty Mutual representative, we found that its discounts will also vary widely depending on the homeowner, and offers are generally not available in all states. However, after investigating security discounts ourselves, we did notice some outsized discounts for Liberty Mutual's partnership with Vivint. For example, a home insurance policy cost in Massachusetts was discounted from $164 per month to $144 per month ($20 per month or $240 annually) when we added centrally monitored theft, fire and water-protection Vivint devices supplied to the quote, resulting in outsized savings of 12% on the premium. When replaced with equivalent, non-branded monitoring devices, these savings were only $10 per month, or 6%. It is important to note, however, that these are centrally monitored smart devices. Therefore, part of the reason for the large discounts is not that these are smart devices that notify the homeowner of danger, but that they notify professionals—the police or fire department—as standard central alarms would.

Insurer rate filings illustrate that discounts are highly specific to a homeowners situation. But unlike Travelers, Liberty Mutual's online quote tool allows shoppers to instantly check and compare these discounts for themselves.

Should Homeowners Seek Out Insurers with Smart Device Discounts?

Given that many of these smart device packages cost several hundred dollars, they are rarely an investment that will pay for itself through savings on your premium. The biggest discount we found, via the partnership of Vivint and Liberty Mutual, requires purchasing a variety of home protection devices from one brand, and this discount represented the exception rather than the rule. Savings on premiums from smart devices, though highly variable, tend to be minimal, and traditional monitoring devices such as central fire, smoke and water sensors provide bigger discounts.

Homeowners searching for the best homeowners insurance policy for themselves should consider a variety of factors, such as coverage features, overall price, customer service and financial stability. Discounts related to smart devices are just one small part of that equation. However, if homeowners have decided to purchase these smart devices anyway, they should be sure to talk to their insurer and take advantage of all possible discounts that may apply.

Should Homeowners With Smart Devices be Worried About Data Privacy?

The prevalence of smart devices in the home has raised concerns about data privacy and the extent to which the devices may be recording homeowner's private information, known and unbeknownst to them. Consumers who have smart devices in their residence may be vulnerable to their data being compromised, both directly from their devices and from insurance companies that collect and store their data.

For instance, a Florida insurance filing for First Community Insurance states that if its customers receive a discount for a home telematics advice, they, "...consent to the release of all data and/or information produced, monitored, obtained and/or captured by such device(s), by the devices’ third party provider to the Insurance Company." Unwittingly, homeowners seeking a discount may be sharing sensitive data with their insurer.

Are consumers with smart devices compromising their data security? Asaf Ashkenazi, Chief Strategy Officer at Inside Secure, a technology security solutions firm, believes so.

"The security of most of these consumer devices varies from no security at all to basic security," said Ashkenazi. The lack of security makes the devices, "easy targets for hackers who can obtain live video streams and other private data."

Of course, hackers don't have to target individual consumers. Insurance companies hoarding consumer data are vulnerable to breaches if they don't take measures to tighten information security protocols. "It is almost certain that such insurance companies' databases are a target for hackers," warns Ashkenazi. "There are many cases where companies responsible for handling this data don't do enough to protect it, leading to massive leaks."

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