A sticking point in the debate for and against residential fire sprinkler systems is always cost. Home builders claim sprinkler systems add exorbitant costs to the price of a new home – $5,000, $10,000 or more. Advocates for fire sprinklers claim $1 to $2 per square foot resulting in $2-$4,000 for a typical American home. Both sides have dug in resulting in a cats and dogs situation where neither considers the point-of-view of the other. An incredibly important and rarely mentioned fact is fire sprinkler systems actively help pay for themselves through lower insurance premiums.
In 2007, the National Association of Home Builders (NAHB), conducted a study to determine exactly how beneficial fire sprinkler systems were in relation to home owners insurance. The results were very encouraging. In each state, the NAHB contacted either the state insurance departments or individual insurance firms to determine what, if any, discount was offered to homes owners with fire sprinkler systems. They determined that insurance companies categorize sprinkler systems in two separate classes:
- Class A: Automatic fire sprinklers are installed in all areas including bathrooms, closets, attics and attached structures (garage)
- Class B: Automatic fire sprinklers are totally or partially omitted in bathrooms, closets, attics and attached structures
For a Class A system, the research found the average discount to be 10% and for a Class B it was 5%. Maximum for Class A was 16% provided by Nationwide of Florida and 10% for Class B provided by Liberty Mutual in Connecticut, American Family Insurance Group in Colorado and Wisconsin. It is true, some insurers offer no discount but out of the 172 companies surveyed (broken down by State), only 15 offered no discount for a Class A system.
So what does this all mean? According to the home insurance rate report published by homeinsurance.com, the average national home owners insurance premium for March 2011, was $727.83 annually. If that home had a class A system and was insured by any one of the major insurers offering a discount the home owner would save $73 annually. To extend that for arguments sake, $73 per year multiplied by a typical 30 year mortgage the savings total $2,190. To sprinkler an average 2,000 square foot home with city water hookup costs approximately $3,220. So over the life of the mortgage, all but $1,000 of the initial investment is recouped through insurance savings. That doesn’t even consider the amount saved when a fire is extinguished before destroying the house and its contents.
Overall, its time that the debate about fire sprinklers starts focusing on what is really important – the life-and-property-saving benefits of a fire sprinkler system.
By the way, the same discounts apply to commercial insurance, too.