Lemonade Insurance Review: 7 Things to Know Before Getting a Quote

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Lemonade Insurance screenshot
Image Credit: Lemonade

If you’re tired of the same old experience of shopping for home or renters insurance, you may want to give Lemonade Insurance a try. This innovative group has redefined what it means to be an insurance company in the 21st century.

For the purposes of this Lemonade Insurance review, I went through the process of applying for quotes for both home and renters insurance. So, I’ll tell you exactly what makes Lemonade different, which states they sell policies in, how much the policies cost and more.

Lemonade Insurance Review: Here’s What You Need to Know

Whenever you’re talking about insurance companies, it’s easy to paint them all in pretty broad brushstrokes.

After all, insurance companies tend to be cold and analytical. They’re all about risk and mitigation of that risk, right? The idea that you might like or even love an insurance company is pretty alien to most people.

Well, Lemonade Insurance has clean-sheeted the idea of insurance. They’ve built their company from the ground up in a new way on a technologically advanced platform.

Coded right into their corporate DNA is the idea of giving back to a variety of charities. That’s an idea that appeals to socially conscious millennials who may be shopping for insurance for the first time.

Lemonade Insurance Review: Table of Contents

  1. What Makes Lemonade Different From Other Insurers?
  2. What Kinds of Insurance Policies Does Lemonade Offer?
  3. In Which States Can You Buy Lemonade Insurance?
  4. How Does the Lemonade Giveback Work?
  5. What Is Lemonade’s Financial Stability Ranking?
  6. How Much Does Lemonade Insurance Cost?
  7. How Do You Cancel Lemonade Insurance?

1. What Makes Lemonade Different From Other Insurers?

Most insurance companies want to collect premiums, but ideally don’t want to pay them out. That’s how they make a profit. However, Lemonade has a completely different business model.

Instead of getting rich on premiums, Lemonade takes a flat fee out of what customers pay each month. Then they use those dollars to pay for three things:

  • Administrative and other overhead costs
  • Reinsurance costs
  • A company rainy day fund

If you’re not familiar with the second one, reinsurance is just what it sounds like: Insurance for insurance companies. It’s a policy insurance companies buy to make sure they have enough money to operate in a “bad” year when there are a lot of claims they have to pay out.

Those three things account for a little less than two-thirds of premium dollars that Lemonade collects, according to the company’s FAQs. Then with the other premium money that’s left over after any claims you make (up to about 40% of the premium), they take it and donate it to a charity of your choice.

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“The way they’re selling insurance makes it a non-adversarial thing. So you have a direct incentive in not trying to commit fraud against your insurer because it’s almost like a co-op for insurance,” money expert Clark Howard says.

Another unique feature of Lemonade Insurance is the company’s use of chatbots instead of brokers to onboard you and get you the right policy. Eliminating brokers from the business model helps keep overhead costs low.

Lemonade Insurance AI chatbot Maya
Lemonade Insurance AI chatbot Maya

2. What Kinds of Insurance Policies Does Lemonade Offer?

Lemonade only sells a handful of insurance policies:

  • Home insurance
  • Renters insurance
  • Condo insurance
  • Co-op insurance

Not every policy is available in every state where the company does business, as you’ll see in a moment.

3. In Which States Can You Buy Lemonade Insurance?

Lemonade officially launched in New York in September 2016. In just a few short years, it’s grown to write policies in 26 states and the District of Columbia.

  1. Arkansas*
  2. Arizona
  3. California
  4. Colorado
  5. Connecticut
  6. District of Columbia
  7. Georgia
  8. Iowa
  9. Illinois
  10. Indiana
  11. Massachusetts
  12. Maryland
  13. Michigan
  14. Missouri
  15. New Jersey
  16. New Mexico*
  17. Nevada
  18. New York
  19. Ohio
  20. Oklahoma
  21. Oregon
  22. Pennsylvania
  23. Rhode Island**
  24. Tennessee
  25. Texas
  26. Virginia
  27. Wisconsin

* Only renters insurance available
** Only renters and condo insurance available

More states are being added all the time, so be sure to check their expansion page often if yours isn’t already on the list. You can also sign up to be notified by email when they arrive in your state.

4. How Does the Lemonade Giveback Work?

Lemonade Insurance screenshot
Lemonade Insurance screenshot

Lemonade says its mission is to “transform insurance from a necessary evil into a social good.” To achieve that end, the company has its Lemonade Giveback policy.

Basically, in years when Lemonade has money left over, they’ll donate it to a charity of your choice. As stated earlier, the money they donate works out to be up to 40% of all premiums they collect in a given year.

In 2019, for example, Lemonade gave more than $630,000 to a variety of causes including:

Donations are up more than tenfold since 2017. During that year, Lemonade donated just north of $53,000 to a variety of causes.

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“[The Lemonade Giveback is] a whole thing that’s very appealing to people in their 20s,” Clark Howard says. “The whole idea of having a greater purpose to what you do really resonates with younger people.”

5. What Is Lemonade’s Financial Stability Ranking?

Clark Howard typically recommends that you only buy insurance from companies that have a financial strength rating of A+ or A++ from A.M. Best. That organization is the leading credit rating industry for the insurance field.

Lemonade is a fully licensed insurance carrier in every state they operate in, and they underwrite their own policies. But because Lemonade is such a very young company, they are not yet rated by A.M. Best.

Lemonade does, however, have a financial stability rating of A – Exceptional from Demotech, an insurance rating company that’s similar to A.M. Best.

6. How Much Does Lemonade Insurance Cost?

Lemonade says it offers renters insurance from $5 a month and homeowners insurance from $25 a month. I decided to put those numbers to the test.

Fortunately, getting a quote from Lemonade is easy. You can either download their mobile app and do everything on there or you can get a quote on your desktop computer here.

I pulled up the website for a couple of quick quotes to find out how much Lemonade Insurance really costs. It only took me two or three minutes flat for each quote!

All properties I quoted for were located in metro Atlanta. Here’s what I found:

Lemonade Homeowners Insurance Quote With $1,000 Deductible

Dwelling $200,000
Personal property $100,000
Loss of use $60,000
Personal liability $100,000
Medical payments to others $1,000
Total premium $97/month

Lemonade Renters Insurance Quote With $500 Deductible

Personal property $20,000
Loss of use $6,000
Personal liability $100,000
Medical payments to others $1,000
Total premium $11/month

Lemonade Condo Insurance Quote With $1,000 Deductible

Dwelling $170,000
Personal property $110,000
Loss of use $55,000
Personal liability $300,000
Medical payments to others $5,000
Total premium $96/month

As a reminder, you always want to look beyond the headline premium to understand what level of coverage you’re getting with any insurance policy. This is particularly true when you’re thinking about switching from one insurer to another.

Be sure to review your current policy to make sure you’re paying for the same level of coverage with a new policy that you were getting with your old one. It’s the only way to do an apples-to-apples comparison.

7. How Do You Cancel Lemonade Insurance?

Like any company, Lemonade hopes you’ll love them when you become a customer. But people may choose to cancel their policy for any number of reasons.

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So how easy is it to cancel Lemonade Insurance?

“Cancellation is quick and easy on the Lemonade app downloaded on your smartphone, and can be done at any time. The cancel policy option can be found in the Settings screen, accessed in the top left corner on the app,” we were told by a customer service representative.

“We write the policy for a full year, but there’s no fee or penalty for cancelling early. You will also receive a prorated refund within a few business days of cancellation.”

Final Thought

As I discovered during my review of Lemonade Insurance, this is one company that’s built on a different premise than a lot of other insurance companies. By earmarking a good chunk of their premium money for charity, Lemonade has removed a lot of the incentive to hold on to their customers’ money.

As the company says on its website, “We gain nothing by delaying or denying claims, so we handle them quickly and fairly.”

So, if you hate battling with insurance companies tooth and nail after you file a claim, you might want to give Lemonade a look.

Meanwhile, if you’ve never purchased renters insurance before, you’ll probably want to check out our article on 4 Things to Know Before You Buy Renters Insurance and our guide to the Best and Worst Renters Insurance Companies.

And for all you homeowners out there, you’ll want to be sure to read our guide to the Best and Worst Home Insurance Companies for more context.

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