Why Insurers Offer Premium Discounts for Smart-Home Devices

A smart thermostat can turn up the heat in your home before you roll out of bed. A smart speaker can play your favorite podcasts with a voice command. A smart lightbulb can be turned on or off from across the room.

But smart-home devices aren’t just about convenience. Because some of them can help keep your home safe and secure, they could also earn you a discount on your homeowners insurance.

NerdWallet reached out to a dozen insurance companies and found that most of them offer discounts to homeowners with smart-home devices designed to prevent water damage, fire or theft. In our research, we found companies advertising homeowners insurance discounts up to 13%, depending on the device and where you live.

Among the companies we surveyed, the smart devices most commonly eligible for discounts were water leak sensors, security cameras and smoke detectors. However, insurers like Farmers and Lemonade also offer savings for smart locks, while Amica and Farmers give discounts for motion sensors.

If you already own a smart-home device, ask your carrier whether you’re eligible for a discount.

Some insurers have partnered with smart-home technology companies to make the devices more affordable — or even provide them for free. For example, State Farm policyholders in most states can sign up for three years of free Ting service. Ting provides a plug-in that monitors your home for electrical problems that could cause fires.

Hippo, a homeowners insurance startup, gives policyholders in eligible states free smart home-monitoring kits from partners such as Kangaroo and SimpliSafe. As long as the policyholder installs the devices and keeps them active, they can save up to 13% on their homeowners insurance.

Amica policyholders can save when buying select smart-home devices from Moen, Guardian or Kangaroo, while Nationwide offers nearly 50% off the purchase of Notion smart sensors. These savings are in addition to the homeowners insurance discounts the companies will give you once you install the devices.

Insurance companies offer discounts for smart-home devices because the technology can help catch problems early, potentially preventing expensive claims.

Say you have a smart water sensor next to your water heater, and the appliance springs a leak. The device could sound an audible alarm and send an alert to your phone, enabling you to take immediate action. (Some devices even have an automatic water shut-off feature.)

Without the sensor, you could end up filing a claim, paying a big deductible and having contractors in your basement cleaning up damage, says Brett Sobol, senior growth initiatives lead at Hippo. But with the sensor, the damage might be so limited that you wouldn’t need to make a claim at all.

“The best experience is one where there’s no claim,” says Sobol.

The cost of smart-home technology can add up quickly. If you want to invest in a protective device but aren’t sure which ones are worth the money, consider your home’s unique risks, says Karen Collins, assistant vice president of personal lines at the American Property Casualty Insurance Association.

For instance, if your home has older plumbing, water sensors might be worth buying, Collins says. But if you live in a neighborhood with high crime rates, your money might be better spent on a home security system.

For many homeowners, water sensors are a good bet, according to Sobol. “Water damage is by far the most common claim ”that smart-home devices can help prevent, Sobol says. Putting sensors in bathrooms, in basements and under appliances “can (keep) small claims from turning into big ones.”

Ask your insurer whether the devices you’re considering would qualify you for a homeowners insurance discount. Depending on the amount of the discount and the cost of the devices, they might pay for themselves within a few years.

Keep in mind that the benefits of smart-home technology could go beyond insurance savings. “Investing in smart-home technology can offer customers peace of mind,” Sobol says, “knowing that their home is better protected.”