Lemonade Insurance Review
Most homeowners understand that having insurance to protect one of their most valuable assets is a must. In fact, if you have a mortgage, homeowners’ insurance typically isn’t optional, as getting a loan without it is essentially impossible.
However, renter’s insurance is just as critical for those who don’t own their property. Both options give you the ability to protect your things, and your financial future, should disaster strike.
If you are shopping for renters insurance, it’s easy to become overwhelmed by the sheer number of options available. Additionally, getting renters or home insurance can be a complex process, requiring you to estimate the value of your property to secure enough coverage. Plus, if you select the wrong company, it can be surprisingly costly.
Lemonade Insurance aims to simplify the process of obtaining renters and homeowners insurance at affordable prices.
How Does Lemonade Insurance Work?
Lemonade Insurance Company is in the business of providing property and casualty insurance but uses technology to help keep overhead costs lower. Additionally, while Lemonade doesn’t officially use the term, they operate peer-to-peer style, pooling the money of virtual groups to handle claims.
Essentially, Lemonade adds a social aspect to the insurance industry. Each peer group’s premiums are pulled together and used to pay claims by any of the group’s members.
Lemonade Insurance Policies
Lemonade provides policies in four basic categories:
The Lemonade renters insurance covers the household goods, clothes, furniture, and other belongings a renter owns, ensuring that they can replace their items if they are damaged in an event, like a fire, or if they are stolen.
Lemonade home insurance, as well as condo insurance, also covers a person’s items, but goes further and includes coverage for the property itself, such as the structure.
In all of the policies, the theft coverage extends beyond the home. For example, if your laptop is stolen while you are at a coffee shop, your coverage applies.
Since the company treats premiums like the money belongs to the policyholders and not the company, when a claim is filed, they payout fast. Plus, since most of the purchase and claims processes are automated, their overall approach to insurance helps them keep costs low.
Lemonade Renters Insurance
Basic renters insurance coverage starts at $5 per month with $10,000 in coverage. It goes up from there depending on the details of your residence and options you select.
Getting Lemonade renters insurance policy is quick and painless via their website or mobile app. Thanks to AI chatbot technology, you are guided through a series of easy to understand questions. Eliminating the phone option helps them keep their overhead costs down, and they pass that savings on to policyholders.
After providing basic data, you’ll get your basic quote. In total, it only takes about 90 seconds.
From there, you can explore the available coverage, make adjustments to the amounts, choose a start date, add another person, and select extra coverage (such as a jewelry rider). Then, just add some credit card details for the premium charges, and you have a policy.
After that, you get to choose the cause that matters to you. If your group’s pool has money left over, that’s the charity that receives the excess funds each year.
It’s important to note that a Lemonade renters insurance policy can cover others in your household – including spouses, blood relatives, and those related through an adoption – automatically. When you estimate the amount of coverage you need, make sure to include items owned by everyone if the plan is going to provide everyone with insurance.
Significant others living together can also be on one policy, though it is for an additional cost. You cannot add a roommate to your policy unless they qualify as a relative or significant other.
Lemonade Home Insurance
Basic homeowners insurance coverage starts at $25 per month and goes up depending on the details of your house and the options you select.
The process for getting a Lemonade home insurance policy is incredibly similar to the renter’s option. You’ll need to answer a few more questions and will have more coverage options to review, but what you have to do is essentially the same.
It is important to note that Lemonade will only cover single-family homes through their home insurance option. If you own a multi-family building, like a duplex or apartment building, then you will need to look for coverage elsewhere.
How Does Lemonade Make Money?
For any insurance company to remain in business, it has to make money. Other insurance providers often use the funds that weren’t used to pay out claims to support their operations, giving them the ability to achieve incredibly high profits by denying or delaying claims and keeping the excess money.
Lemonade is different. Instead, they take a flat fee from each premium. It is set at 20 percent, allowing them to cover costs like employee salaries and operational expenses.
At the end of each June, if there is still money in a group’s pot, Lemonade doesn’t keep the cash as profit. Instead, they donate the money to a non-profit charity of your choice, leaving them with zero incentive to deny claims as it won’t help them maximize profits.
Is Lemonade Insurance Affordable?
However, you aren’t guaranteed to get those prices. The amount you pay will be based on your needs and location, so it’s important to understand that those are just starting points.
How Do I File A Claim?
Filing a claim with Lemonade is incredibly simple. In total, it only takes about 3 minutes from beginning to end.
You’ll interact with an AI chatbot either on the site or in the app. You can let them know if you need a repair team quickly, the nature of the incident, and when it happened.
You sign your claim right through the app, including a statement that the information you provided was true and accurate. Then, you record a short video describing the incident.
Finally, you list an item, its value, and details about the original purchase. If you need to list multiple things, you just add another item until your list is complete.
Approval is nearly instantaneous, and you’ll see a message saying how much will be sent to your account.
Are There Any Drawbacks to Lemonade Insurance?
One risk of using Lemonade actually revolves around their willingness to pay claims. Since they payout quickly and with very little fight, more money heads out the door than might with other providers.
If they pay too many claims, they operate at a loss. Should this happen, Lemonade has to raise rates to compensate, ensuring that they can achieve financial homeostasis.
Alternatively, they will need to make the claim process more stringent, which could result in a higher number of claim denials or more red tape to deal with in the future.
Cost of Annual Policies May Increase
Since most policies are issued annually, each period could come with a higher price tag. While Lemonade uses reinsurers – a form of insurance for insurance companies – to make sure they can pay a claim even if they have a “bad year,” if they rely too heavily on those services, their reinsurance costs rise.
If that happens, that increase will end up on the shoulders of policyholders.
Lemonade is also somewhat limited when it comes to their offerings. Many insurance companies offer renters, home, and auto, at a minimum. However, Lemonade hasn’t gotten into the car insurance game, so you can’t bundle your policies with them.
Most insurers provide discounts to customers who bundle. If you break up a bundle to move your home or renter’s insurance policy to Lemonade, you’ll lose that discount, causing your auto insurance price to rise.
Limited, But Growing Availability
Finally, Lemonade isn’t available everywhere, but they did add 6 new states in 2019 alone!
You can get any of their policy types if you live in: Arizona, California, Colorado, Connecticut, Georgia, Illinois, Indiana, Iowa, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Virginia or Washington D.C.
In Rhode Island, only renters and condo insurance are available.
For people in Arkansas, New Mexico, you’ll only see renters insurance.
While other locations are rolling out, including some this year, there is no guarantee of what may be available to you and when.
When Life Hands You Lemons, Get Lemonade Insurance!
Ultimately, the process of getting a quote is incredibly painless, and you could save substantially compared to policies through other companies. Additionally, the fast payout on claims is something you essentially don’t see anywhere else, so Lemonade offers a lot of peace of mind.
From a financial perspective, it’s smart to get a quote and compare it to your current coverage, including any cost changes you may face if you have to unbundle your existing policy.
Make sure to look at the price for Lemonade insurance and your existing policy, as well as the coverage amounts and limits, as differences there can make policies with similar price tags incredibly different if you need to use them.
While peer-to-peer insurance is a new paradigm, P2P has been very effective in other financial industries, particularly lending, so Lemonade is certainly worth exploring for your renters or home insurance needs.