Insurance, or the concept of it, is simple. Should an incident occur, one can sleep
comfortably knowing the insurance company will compensate any losses by drawing
money from a reserve. However, such a system can only work when there is more
money going into the reserve than there is being drawn from it. Since insurance basically
spreads the risk of a few among the many, people who have a higher chance of filing a
claim pay higher premiums to offset the risk of running the reserve dry.
In an ideal world without crime and natural disasters, homeowners can leave their houses unprotected for an extended period of time, assured they will remain changed by nothing but dust. Sadly, such a world has yet to dawn upon us. As such, certain measures must be taken to defend our safe harbors from criminals and freak acts of nature. Many homes already have basic security systems to prevent unexpected damages, such as burglaries or fires.
Yet these devices are no guarantee that a home will be safe from danger. Should an unfortunate event occur, owners hope to be compensated for losses and recover as quickly as possible from disasters. Such recovery is impossible if a home is not properly insured. “A security system cannot replace or negate the need for adequate insurance coverage,” said Dave Newbury, PR Chairman for the Security Systems Section, British Security Industry Association (BSIA).
Lower, Lower, Lower
While having adequate coverage is important, many people consider the expense a burden. For the thrifty homeowner, finding ways to save on home insurance is necessary when planning for personal finance.
One of the ways to save on home insurance is to install an alarm system. Insurance relies on statistics — the less likely a person is to make a claim, the lower his or her premiums will be. Many insurance companies offer discounts when homeowners take measures to make their homes more secure, such as installing alarms, thus making them less likely to file a claim.
However, policies vary widely for insurers in different parts of the world. For some insurance companies, simply having an alarm installed is sufficient for a discount. “Our underwriters ask for confirmation that an alarm has been installed, and if it is local or monitored,” said Vince Northey, Underwriting Section Manager, State Farm Insurance Canada. “We do not determine the effectiveness of security systems. We do provide a higher discount for monitored alarms than for local alarms.”
Others may have more specific demands. Many insurance companies require a home to have fire protection and burglar alarms installed to qualify for a discount. “But some are now also starting to request flood monitoring and low temperature monitoring, accomplished through sensors strategically placed in the home,” said Lou Martorello, Senior VP of Sales, World Wide Security.
If burglary is not a main concern or not covered by the policy, taking measures to prevent it does not affect insurance premiums much. “For the UK market and many other EU countries, the burglary risk part of an insurance premium is very small, therefore the total savings are not that great,” said Tony Makosinski, PR Committee Member for the Security Equipment Manufacturers Section, BSIA. “One company recently told me that the discount is less than 5 percent off on the theft part of the premium — not the whole premium.”