Question:
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Hi Ken,
I signed up with a monitoring company to resell their monitoring services. I’m sure you know how this works but I will explain what I am doing to avoid misunderstandings.
I install and service the alarm. I have an account with a UL listed monitoring company. I tell the customer I can monitor the system. I connect the alarm to the central station. I pay the central station and the customer pays me. When signing up with the central station they say in the contract with me that they are not an insurer or something like that.
I now have a contract from you I can have the customers sign with disclaimers.
First, Is this a bad situation?
Second, I don’t have any insurance for monitoring. I do have general liability insurance. Would you recommend I have “monitoring insurance”. I don’t really know who to ask. If I ask the insurance company I know what they will say. J
By the way…I love the emails!
Thanks
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Answer:
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Your relationship with the central station is typical. But I think you need a better understanding of the relationship. You find a subscriber, install an alarm system and tell the subscriber you will monitor the alarm system. You then have the central station do the monitoring.
You are not reselling the central station's monitoring service. You are selling your monitoring service and you are subcontracting the monitoring to a central station who acts as your subcontractor for that service. This is a vital distinction because you own the subscriber account, not the central station. This is why you require your own Monitoring Contract. The monitoring contract that you may have gotten from the central station is not the one you need, although the central station may require it for its own purposes and protection.
You must have insurance that protects you in your alarm business operations. The insurance is called Errors and Omissions insurance and it is part of a general liability policy. Make sure you use an insurance broker who knows the alarm industry. For most smaller companies the premium should be less than $2000.00. It's well worth it.
It's essential that you own the monitoring subscriber contract so that you build equity in your business. The recurring revenue in your contracts is one of the components used to calculate the value of your business. If you are "reselling" monitoring for your central station then you may as well give up your business at get a job there as a salesman and installer; benefits might be better. No, I am not seriously recommending that, but that's exactly what many alarm companies end up doing when they belong to a dealer program that requires them to sell the subscriber accounts to the program, or an alarm company who sells off its contracts to a finance company or other alarm companies as a matter of course. Keep the accounts, build your RMR, retire [or die] rich.