If it's FREE it's for me?

When facing the decision to purchase an alarm system, many consumers find themselves in a bit of a quandary. Do I sign up with a company that will offer a FREE alarm system, or do I make an investment for a system upfront, with a local company. I want to go over the differences between the two.

First, I will start with the companies that offer a “Free” alarm system:

Typically, the companies that are offering you a Free (or close to Free) system, are offering a system that comes with a contract. This may or may not be an issue to you, because if you are going to be staying at your location for a long period of time, you can take advantage of the free offer. If you will be moving in a short period of time, make sure to get a copy of the company’s move policy PRIOR to signing any agreement. Some companies will charge you a hefty relocation fee if you move while still under contract, while others have a Free relocation policy. Next, these low up-front cost companies are typically dealers for a larger organization. Take for example ADT. Take notice to the website site you are looking at. Does the logo say “Authorized Dealer” anywhere? If so, you are not dealing with ADT directly.

ADT_authorized_dealer-300x261 The majority of companies on the Internet are NOT the actual company, but the dealer. Again, this may be a positive as some dealers are more aggressive than the parent companies they are selling for, but it is always nice to know who exactly you are dealing with. One question you may want to ask the company you are dealing with (if it is a dealer) is how long is the service guarantee period. This is the amount of time that the parent company requires the dealer to service your alarm system, and after that time has elapsed the parent company becomes responsible. Usually dealers market, sell, and install the alarm system, and then sell the monthly contract to the parent company for a sales commission. The only issue here is that many dealers are more interested in gaining the initial sale, and not servicing the customer after the fact.  The good news is that once they sell your contract, the customer has leverage now over the dealer by going directly to the parent company if there are any issues, and the dealer is at the mercy of the parent company because they can ask for their sales commission back (usually in the first year) if the customer is not happy.

Free companies will usually charge you a higher rate than the companies that ask you to pay up front. The reason for this is that their business model relies on the customer recouping the costs of the equipment, installation, sales commission, cost to generate you the customer as a lead, monitoring costs, in addition to other costs. Lastly, the Free companies do not usually design a system custom to your needs. They are more focused on what “package” to give you as opposed to truly protecting your home and family. You can typically tell by the questions they as you, as opposed to what they are trying to sell you. If they ask a series of questions like “when do you plan on using the system the most?” and “what hours of the day is the home occupied vs. unoccupied?”, this shows interest in YOUR needs (proper Home security) vs. THEIR needs (the sale). You can typically negotiate a very competitive monthly rate with this type of company because they are motivated to sell at high volume, but not as low as the cost-up-front companies because they have already recouped their investment by charging up-front.

All-in-all this type of model may work to your advantage if you know you are 1) going to stay in your location for a time period of >3 years 2) don’t require a high level of customization 3) going to negotiate a great deal with the salesperson 4) OK with making sure you understand the contractual language and what YOU are responsible for, as well as what the company is responsible for.  Please note that if you require equipment outside of the company’s “Free Package” you will be paying something up front, but nowhere near what you would be paying if you had to invest in the entire system.

Next, I will discuss the companies that charge an upfront cost, even for a very basic alarm system:

“Cost up front” alarm companies are usually local companies that make their money up front, as opposed to the “Free” companies that make the bulk of their revenue over the course of a contract period. These local companies usually have been in the business for quite some time, but are not geared to service the customer maybe as fast as a larger company.  I have seen local alarm contractors who literally use their cellphones as the service center. If something goes wrong with your system at 2 am, you maybe waking your contractor out of bed, or he may sleep through it and call you when he wakes up. Of course, not every local company functions this way. More professional local companies are well established and have systems in place to handle after-hours service issues like an answering service for example. Local companies that charge up front can sometimes require a monitoring term agreement like the Free companies however, they usually are on an annual basis. The cost up front is to pay the technician, salesman, cover the cost of equipment, and of course profit. That gives the company room to charge less for the monthly monitoring. In many cases (but certainly not all), this type of company offers a more custom system, but you will be paying for it. On average, I believe the quality of the equipment to be on par with that of the “Free” alarm companies unless you require a much nicer fit-and-finish, or higher level of customization. The difference here is if you want more of a custom system, this type of company is geared to show you options, whereas the “Free” alarm companies has a one-size-fits-all type of system.

To summarize, use this type of company if you 1) require a higher degree of customization 2) negotiate a much lower monthly rate 3) understand the servicing responsibilities of this company and are OK with (usually) waiting until the next business day for support.

                           Free System            Upfront cost system

Out-of-pocket cost Minimal, if any Substantial
Monitoring agreement Minimum 36 months Minimum 1 year
Monthly Costs $30-$70/mo* $8-$40/mo*
Equipment Usually Entry level You pay for upgrades
Customization Very low if any You pay by customization
Service 24 hour National service center Locally serviced
Installation Usually wireless Usually hard-wired

*Approximate

As you can see from Figure 1.1, there are pros and cons to both models. Determining which one is right for you is based upon your needs and of course, your budget.

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David has been in the alarm business for over 15 years and has done everything from installing alarm systems to managing a multi-million dollar alarm company.

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