Lemonade isn’t just a sweet drink that’s perfect for summer. It’s also the name of a relatively new insurance company known for its use of artificial intelligence and its practice of charitable giving.
Table of Contents
- Lemonade Insurance Review: Quick Look
- What Is Lemonade Insurance?
- How Does Lemonade Insurance Work?
- Lemonade Renters Insurance Review
- Lemonade Pet Insurance Review
- In Which States Can You Buy Lemonade Insurance?
- Lemonade Insurance Review: Where It Shines
- Lemonade Insurance Review: Where It Falls Short
Lemonade Insurance Review: Quick Look
|Comany Name||Lemonade Inc.|
|Company Type||Multi-disciplinary insurance company|
|Key Features||Automation, non-adversarial business structure|
|Downsides||Limited availability, some policy types not as competitive|
|Best For||Basic, affordable, no-hassle insurance|
What Is Lemonade Insurance?
Founded in 2015 and headquartered in New York City, Lemonade Inc. is an insurance company.
It offers renters and homeowners coverage as well as car, pet and term life insurance. As of 2020, Lemonade said that about 70% of its customers were under 35 years old.
Lemonade says it keeps 25% of its customers’ premiums and sets aside the rest to pay claims and costs. Because Lemonade takes just that flat 25%, the company is, at least in theory, less incentivized to deny claims.
At the end of each year, Lemonade takes the money that it didn’t pay out for claims and donates it to charities chosen by its customers. It’s registered as a public benefit corporation and is certified as a B-Corp.
“The way they’re selling insurance makes it a non-adversarial thing,” money expert Clark Howard says. “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.”
Lemonade uses artificial intelligence and chatbots rather than traditional insurance salespeople. This theoretically lowers the company’s expenses and can save some customers a lot of time. I found that getting a quote is fast and easy. And according to Lemonade, it pays out close to 30% of its claims via automation within minutes.
The company is relatively new; A.M. Best has yet to give it a rating. A.M. Best is a credit rating agency that specializes in insurance companies. Especially for term life insurance, Clark recommends doing business with companies that have earned A+ or A++ ratings. It’s important that your company is going to be around for the entire policy, which often spans 20 to 30 years.
Demotech, which is similar to A.M. Best, gives Lemonade a rating of “A — Exceptional.”
How Does Lemonade Insurance Work?
One of Lemonade’s strong points is that it’s super easy to get a price quote. I just clicked “Check Our Prices” on the company’s website and worked through a simple questionnaire.
Make sure to review the coverage that Lemonade is offering you. Making one or two simple changes to the coverage amounts can change your premiums significantly. If you’re not careful, it’s easy to breeze past this part of the quote wizard.
Check out the difference in this monthly premium for renters insurance when I changed my personal property coverage from $30,000 to $10,000 (top right inside the pink box):
Once you get to this point, Lemonade asks for your payment information. You can accept coverage that quickly, so be sure to take all the time you need comparing rates and coverage amounts.
Lemonade Renters Insurance Review
Landlords often require renters insurance as a condition of your lease.
My apartment complex required us to prove that we carry renters insurance when my wife and I signed our lease. However, it didn’t specify any coverage requirements.
We probably wouldn’t have gotten renters insurance if it hadn’t been required, so we were comfortable choosing the least amount of coverage possible.
Lemonade has a reputation for offering great prices on minimal coverage for renters. Plus, you can set up your account in minutes on your own schedule without having to talk to anyone.
How Much Does Lemonade’s Renters Insurance Cost?
I looked up the cost of Lemonade’s renters insurance in the greater Orlando area.
For a $1,000 deductible with the following coverages, Lemonade quoted me just $6.25 per month.
|Type of Coverage||Coverage Amount|
|Loss of Use||$4,000|
|Medical Payments To Others||$1,000|
Lemonade Pet Insurance Review
Along with renters insurance, pet insurance seems to be one of the products that Lemonade is best known for.
Consider the potential coverage loopholes and make sure that your pet’s breed and age aren’t excluded.
Here are the things that Lemonade asks about in order to provide a pet insurance quote:
- Dog or cat
- Pet’s age and gender
- Pet’s medical history
You’ll have the option to choose the percentage of your bill your insurance policy will pay, the maximum that Lemonade will pay per year and how much you’ll pay for your deductible each year. Lemonade also offers preventative care packages and other add-ons.
A good alternative to pet insurance is to establish and maintain a pet emergency fund, Clark says.
In Which States Can You Buy Lemonade Insurance?
Lemonade currently offers at least one type of insurance in 35 of 50 states as well as Washington D.C.
Here’s a map of the states (in pink) where Lemonade currently operates:
Lemonade Insurance Review: Where It Shines
- Inexpensive coverage. Lemonade’s entry-level renters insurance is especially cheap if you opt for the minimum level of coverage. That’s largely true for Lemonade’s insurance policies overall, which tend to skew toward basic, affordable coverage.
- Symbiotic business model. Lemonade is theoretically less incentivized to deny claims because it takes its 25% cut up front. Its claims decisions won’t impact its bottom line. Customers also may be less inclined to attempt insurance fraud because that would take away funds from fellow customers and from charities.
- Automation and data. On the customer-facing side, the chat bot and algorithm can save a ton of time. The company says a healthy portion of claims, for example, get automatically processed within a few minutes. Others get flagged for a more thorough review. The data Lemonade gathers will likely make this process more even efficient over time.
- Customizable charitable giving. Plenty of insurance companies give truckloads of money to charity. But Lemonade lets its customers choose the causes they want to support from a long list. Customers can even submit an organization for Lemonade to consider including.
Lemonade Insurance Review: Where It Falls Short
- Not available everywhere. Lemonade does business in only 35 states right now, and not all of its products are available in each state.
- No A.M. Best rating. Clark recommends getting term life insurance only from a company with an A.M. Best rating of A+ or A++. Lemonade hasn’t existed long enough to earn an A.M. Best rating, so it’s hard to recommend its term life insurance at this point.
- Limited live customer support. Automation means lower overhead, and that sometimes saves customers money. However, that’s a double-edged sword, especially if you need help. If the chatbot doesn’t answer your questions, it may be hard to reach a real person.
- Home insurance draws criticism. Some reviewers have been critical of Lemonade’s home insurance product. In some cases, the amounts and types of coverage that Lemonade provides aren’t competitive relative to its monthly premiums. Be sure to consult our guide on the best homeowners insurance to find the right policy to suit your needs.
Lemonade’s marketing and business model is interesting and even commendable. But the fundamentals of purchasing insurance don’t change.
Make sure to compare prices and coverages from multiple companies in your area before you buy. And if you’re going to buy long-term insurance such as term life, take extra care to buy only from companies that have an excellent chance of staying in business through the entire term of your policy.
Each person’s circumstances are different. But if you’re looking for inexpensive premiums in exchange for somewhat limited coverage, especially for renters and pet insurance, Lemonade may be a good choice.