Wednesday, January 25, 2017

Alarming Misinformation About Alarms

These days, the subscription model for businesses is where the money is. Making a product someone pays for once is so passé. Why settle for a one time payment when you could be collecting money month after month from your customers? Understandably, some consumers are concerned with this trend, so marketers like to point out all the ways a monthly subscription will give you more benefits and may, in fact, even save you some money.

Alarm monitoring companies are huge promoters of the latter. If you have a monitored alarm system, they point out, you will likely receive a discount on your homeowners insurance. One figure widely touted is a savings of up to 20%! Check out these claims (click the images to be taken to the quoted site):

Home Advisor - How Alarms Systems Add Value While Keeping You Safe

Home Advisor - 2017 Alarm Monitoring Costs

SafeWise - 8 Benefits To Owning A Home Security System

A Secure Life - Top 10 Reasons To Install A Home Security System

Always Remember Your Source

The claim that a monitored alarm system can save you up to 20% on your home owners insurance seems to come from a 2011 study conducted by the Rutgers University School of Criminal Justice. However, further examination will reveal that the study was paid for by the Electronic Security Association, a trade advocacy group for manufacturers and sellers of security systems. That's a pretty good reason to view the findings with a critical eye.

A widely used quote from the president of the ESA is that the insurance savings can be substantial enough to offset a portion of the monitoring costs:

Sounds good! I might be more likely to pay a monthly monitoring fee if I can recoup some of the cost via savings on my home insurance!

Turns Out, Those Savings Claims Are Wildly Optimistic

My house has a monitored alarm system and has had it since the day we bought it. The house was bought new and the alarm system was included, so I don't really have any installation cost to examine. However, I do pay a monthly fee for monitoring that runs about $37.75. I could pay only $32.75, but I cancelled my landline phone line eight years ago and had to switch the alarm system to a wireless receiver, which added $5 per month to my bill. The installation fee for the wireless receiver was $125, but I have long since recovered that cost from the savings I've obtained from not having a phone landline for eight years.

Several years ago, I thought about cancelling my alarm service. I even called up the monitoring company, but I was given a hard sell and was talked out of quitting. (I wasn't so financially savvy back then.) One of the things I remember the person on the phone telling me was that if I cancelled, they would have to call my insurance company and tell them, so my insurance rates would go up. That scared me - no one wants insurance rates to go up! It never even dawned on me that they didn't have a clue who my insurance company was, so they couldn't call anyone if they wanted to. Doh!

I Finally Crunch The Numbers

Fast forward many years to the present. Last week, I noticed my alarm panel was reporting an error code. I called and was told that my wireless receiver was no longer functioning. It used old wireless 2G technology and all the 2G cell towers in my area were decommissioned, so the unit had to be replaced with a unit that used the 3G network. I was told there would be a $79 fee for the change. I asked why I had to pay that, since it's their equipment, their service, and I had done nothing that required the change. I was put on hold and a few minutes later, was told that the fee would be waived. Score one for me.

Their brazen attempt to get me to pay a fee caused me to re-examine the whole alarm monitoring concept, so while I was waiting for the service tech to show up, I starting crunching the numbers.

Because my home owners insurance is billed annually, let's look at the alarm system costs on an annual basis. I pay $113.33 per quarter, or $453 each year to the alarm company. My city also requires all users of a monitored alarm system to pay a $10 annual alarm permit fee to my police department.

Total Annual Cost For Monitored Alarm: $463

My yearly homeowners insurance premium, including all discounts, is $635.06.

The discount I receive for having a monitored alarm is:


This was so far off from the "up to 20%" claim I had read, I actually called my insurance company to see if this discount was being quoted on a per month basis. Nope. That's per year.

My monitored alarm system is only giving me a 0.8% discount on my home insurance.

Is It Worth It?

No way. I'm spending $463 to save $5. Guess what service I just cancelled?

There Are Benefits - They Just Aren't Monetary

I'm not going to say that alarm systems have no benefits. My alarm system can be set so it beeps whenever a door or window is opened. This was really nice when my daughter was a toddler and we were worried about her walking outside without us noticing. The feature can also provide comfort when someone is home alone and worried about possible intruders.

My wife likes to open windows when it isn't too hot outside. Later, when it becomes too hot, I'll switch on the A/C. Because the control pad can tell me which windows are open, I use it to find and close any windows my wife might have opened to make sure I am not running the A/C with any open windows.

Additionally, an alarm system can provide security even if it is not monitored. If my alarm is triggered, an extremely loud siren goes off whether or not the system is monitored. That's going to scare away any thief.

The lack of monitoring does not make my system completely worthless.

It Comes Down To Your Peace Of Mind

Newer alarm systems can also monitor for fire, carbon monoxide, and all sorts of other dangers. Those features won't likely need to be monitored to work either. However, if you want the peace of mind that comes from knowing someone will call the appropriate authorities if your alarm is triggered, then go ahead and pay for a monitoring service. Just be aware of the true costs and don't be misled by inflated claims of potential savings.