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Alarm systems can reduce home insurance costs

If you’re looking for innovative ways to save money on your homeowner's insurance, you might want to consider installing a centralized alarm system. According to a new survey, most major insurance companies offer significant discounts for homes that are electronically guarded against theft, vandalism and fire.

In February 2011, the Electronic Security Association surveyed the 10 largest companies offering homeowner's insurance and found premium discounts up to 20 percent for residences equipped with a monitored alarm system. The survey comes on the heels of two university studies that illustrate the effectiveness of home alarms in deterring break-ins and property damage.

The first, conducted by Simon Hakim of Temple University, shows that an alarm-equipped, single-family home is more than 60 percent less likely to be burglarized than a similar home without an alarm.

home alarms can reduce home insurance costs

Meanwhile, a study by Rutgers University’s School of Criminal Justice in Newark, N.J., found that even when eliminating other factors that affect crime rates, the number of burglaries in Newark decreased between 2001 and 2005 as the number of registered home burglar alarms increased.

Installing an alarm and saving money

Michael Barry, a spokesman for the Insurance Information Institute, says homeowners typically can expect discounts of at least 5 percent for smoke detectors, burglar alarms or deadbolt locks. For more advanced alarm systems that report directly to a police station, fire department or other monitoring stations, some companies may cut premiums by as much as 15 percent or 20 percent.

“I don’t think a lot of homeowners know about this,” Barry says. “Consumers are probably looking for new ways to reduce their rates, and this is certainly one of them.”

Dick Luedke, a spokesman for State Farm, says his company -- the largest home insurer in the country -- has been considering home alarm systems for premium discounts for many years.

“The risk is usually lowered because of a central alarm system, so we want to charge premiums that reflect that reduced risk,” Luedke says. “It’s just like someone having airbags in their car. The risk of an injury is less, so the premium is also less.”

To get a discount with State Farm, Luedke says consumers need to show that the home’s burglar or fire alarm reports directly to a central station. If the home also is equipped with deadbolt locks and a fire extinguisher, the basic premium savings would be 10 percent in most states, he says.

Allstate spokeswoman Stephanie Sheppard provides a similar formula for her company. While discount offerings vary by state, the company’s “protective device discount” can yield 15 percent savings for installation of a burglar alarm or fire alarm system in a home.

Picking the right alarm

Choosing the right home alarm system can be difficult, says Ralph Sevinor, vice president of the Electronic Security Association and owner of Wayne Alarm Systems in Lynn, Mass.

“The alarms of today are not the alarms of your father’s generation,” Sevinor says. “Back then, it was just about burglar alarms. Today, we can monitor everything from carbon monoxide levels to water leaks. The technology is always evolving.”

To that end, installing a system in your home requires a fair amount of research, Sevinor says. “This is not an off-the-shelf solution,” he says. “Each system needs to be tailored around the needs … of each individual home.”

Sevinor offers these tips for people who may be considering arming their homes with alarms:

• Ask your insurance agent, friends, family or neighbors for recommendations about alarm companies. You also can visit the Electronic Security Association's website (www.alarm.org) for a list of member companies that have agreed to follow the group's code of ethics.

• When you start narrowing your list of alarm companies, call them to make sure their employees are trained or certified by a nationally recognized organization such as the Electronic Security Association's National Training School.

• Contact your local police department. While the cops aren't going to tell you to use a specific company, they can tell you which companies have the most successful track records.

• Ask each alarm company for an inspection and recommendation, and a quote in writing. Use a checklist to compare various packages and prices.

• Make sure the alarm company will work with your insurance provider on meeting requirements for safety discounts on your homeowner's policy.

Barry, the Insurance Information Institute spokesman, cautions that while potential discounts on home insurance are appealing, consumers should make sure they aren’t spending more money on an alarm system (prices can range between several hundred and several thousand dollars) than the discount is worth.

“The policyholder has to weigh whether or not the expense and the discount make sense for them economically,” Barry says. “You don’t want to spend $3,000 and get a single-digit percentage discount.”

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