4 Smart Home Devices That Can Lower Insurance Costs

The right smart-home device can help reduce your risk of an expensive claim and, in many cases, help you qualify for a smart-home insurance discount. The biggest benefit, however, is avoiding home damage in the first place. Read on to learn which smart home devices may qualify for insurance discounts and which ones may make the most sense for your home.

Why do insurers offer discounts for smart home devices?

Insurers may offer discounts for smart home devices because they can reduce the likelihood or the severity of certain types of insurance claims.

A water sensor that flags a slow leak before it reaches the drywall or a monitored alarm that alerts a professional monitoring center—which can then contact emergency responders when appropriate—means fewer and less severe claims, which is why some insurers offer protective-device discounts. Some insurers may also offer rebates or free or discounted equipment.

Before purchasing any smart home device, check with your insurer to confirm whether it qualifies for a discount and whether professional monitoring or specific equipment is required. Not every device leads to insurance savings, and discounts aren’t automatic. Also keep in mind that after installing the device, you must notify your insurer and, for professionally monitored systems, submit proof before any eligible discounts are applied to your policy.

Here are four smart home devices that can help protect your home—and may also help you qualify for a homeowner’s insurance discount.

1. Smart water-leak detectors

Water damage is one of the most common and costly homeowner’s insurance claims, according to the Insurance Information Institute.

Smart water-leak detectors can help prevent damage. They generally fall into three categories:

1. Spot sensors (also called point sensors) sit near a specific risk (a water heater, a dishwasher, a sump pump) and ping your phone when they detect moisture.

2. Flow monitors attach to your main line and learn your household’s normal water usage and then flag anything unusual.

3. Water shutoff devices go one step further and can automatically shut off the water on their own when they detect a major leak, which is why a water sensor tied to an automatic shutoff may qualify for one of the largest water-related home insurance discounts, depending on the insurer.

2. Smart smoke detectors

A standard smoke alarm helps only if someone is home to hear it. A smart smoke detector sends alerts directly to your phone, so you’ll know there’s a problem whether you’re home or away. Smart carbon-monoxide detectors matter for the same reason. Carbon monoxide, which is odorless, can be deadly. A carbon-monoxide detector that syncs with your phone can send you a warning even when no one’s in the room.

Many models flag a dying battery before it starts chirping at, say, 2 a.m. and link every alarm in the house. That means, for example, a fire in the basement will sound the alarms upstairs, too. A smart smoke-detector insurance discount is most likely to be available with professionally monitored fire and carbon-monoxide detection, as a professional monitoring center can contact the fire department even if you miss the alert.

3. Security monitoring systems

Security monitoring systems have the strongest track record of qualifying for homeowner’s insurance discounts. A visible camera or doorbell can often deter a break-in, and insurers have long used burglary and vandalism loss data to price this risk.

Here, the monitoring distinction matters most. A self-monitored system sends alerts to you, while a professionally monitored system is watched around the clock by a company that can call the police on your behalf. Insurers generally reserve the larger homeowner’s insurance security system discount for professional monitoring, and many ask for a monitoring certificate as proof. A security camera insurance discount may apply on its own, but it’s usually smaller than the credit for a fully monitored setup.

4. Smart thermostats

When a pipe freezes and bursts inside a wall, water can quickly damage flooring, furniture, and personal belongings.

A smart thermostat measures the indoor temperature and alerts you when it drops toward the danger zone. Some models can also adjust the temperature automatically to help reduce the risk of frozen pipes. Because it helps reduce the risk of a common and costly winter loss, some insurers may include a smart thermostat as part of a protective-device discount. As an added benefit, it may also improve energy efficiency and reduce your heating costs.

What’s the real payoff of a smart home device?

Think of smart home devices as tools for preventing damage first and lowering insurance costs second. The biggest financial benefit often comes from preventing costly damage and avoiding an insurance claim—not from the premium discount itself. The cost of the equipment, installation, and any monthly monitoring fees may exceed the value of the insurance discount in a given year. For most homeowners, the insurance savings alone won’t offset the full cost of the equipment.

For larger homes, smart home devices often provide even greater value. You’re protecting more square footage, more belongings, and often a higher-value property, so the cost of a leak sensor or smart smoke detector is small compared with the damage it could help prevent.

How do you claim a smart-home insurance discount?

Even if your smart home device qualifies for a discount, it won't automatically be added to your policy. Follow these steps to have the discount applied to your policy:

1. Ask before you buy. Call your insurance company and ask which devices, brands, or professionally monitored systems qualify for discounts under your policy.

2. Consider professional monitoring. Professionally monitored security and fire systems usually earn more than self-monitored systems, so weigh the monthly fee against the larger discount.

3. Keep the paperwork. Hold on to receipts, installation records, and any monitoring certificate. Your insurer will likely ask for proof.

4. Meet the program terms. Some discounts require enrolling in a monitoring plan or sharing device data. Read the fine print to understand what you’re agreeing to before you sign up.

5. Notify your insurer once the system is installed. Confirm the discount has been applied to your policy; some insurers apply it immediately, while others wait until your next renewal.

Where to start with smart home devices

You don’t have to wire the whole house at once. Start with the device that protects against the type of loss you're most likely to face. For most homeowners, that’s water, so a leak sensor or automatic shutoff is often the best place to start. Add security or freeze protection from there.

Treat any premium discount as the bonus, not the reason. When you pair smart home devices with home insurance, their greatest value comes from preventing a small problem from becoming costly damage. Any homeowner's insurance discount you receive is a bonus.

When you’re ready to see what your own policy allows, a licensed agent can explain which protective devices qualify for discounts and how they fit your coverage. If you have home insurance through AAA, it’s worth reviewing your protective-device options along with any additional member savings through AAA Discounts & Rewards.*