April 17, 2019

Lemonade Insurance Review: Pros and Cons

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Lemonade is disrupting insurance as we know it with its peer-to-peer platform. But is it right for you? Read on to learn more.

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How Does Lemonade Work?

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Lemonade is an online insurance company providing homeowner and rental coverage. The company is peer-to-peer, which means customers pool their money to insure against risk.

Rather than dealing with the red tape of a traditional insurance plan, Lemonade allows users to select exactly what coverage they need, thus keeping prices affordable.

  • Basic fees for renter's insurance begin at $5 per month.
  • Fees for homeowner's insurance begin at $25 per month.

The company has an earned an A-Exceptional Financial Stability Rating from Demotech Inc., according to its website.

Lemonade handles the transition from other insurers on the customer's behalf. For those switching from existing homeowner's insurance, for example, the company will notify the lender of the change and handle escrow payments to provide a seamless transition.

This service can save customers time, too. Claims can be submitted through the website or smartphone app. More on this later.

Lemonade Pricing

Policies begin at $5 and increase based on how much personal property will be insured. Customers can also add coverage on individual items like:

  • Jewelry
  • Bikes
  • Cameras
  • Fine art
  • Musical instruments

For example, standard coverage on jewelry is $1,500. Users can expand that coverage to $50,000.

Customers can purchase policies that cover loss, accidental damage, or theft. This applies to items everywhere in the world—whether they're at home, in a locker, or stashed in a hotel room.

While it's impossible to predict the cost of an individual's insurance premium, Lemonade's app and website make it easy to customize coverage and receive a quote.

Any changes to coverage may affect the insurance premium, and the corrected price will become available immediately.

How do Lemonade's fees work? Read on.

How Are Fees Determined?

Lemonade determines fees based on factors like:

  • Recent claims
  • Credit history
  • Property information including size, age, and the quality of construction

It also considers the potential threats to the property by severe weather damage, fires, and windstorms.

Customers with additional protection, like fire and burglar alarm—and even those located within close range to local police and fire stations—may receive discounted rates.

Lemonade deducts a flat 20% fee from your premiums to cover the company's overhead, salaries, and technology replacement. The rest of the premium goes toward insuring customers' claims, according to its website.

The platform also has a social component. Many companies profit from premiums when fewer claims are made. But Lemonade donates its profits to charities at the end of the year. More on that below.

Who Should Consider Lemonade?

Tech-Savvy Types
If you're comfortable doing business online and/or have experience with peer-to-peer platforms, Lemonade may be right for you.

Seventy-five percent of Lemonade's customer base is below age 35.

The Socially Conscious
Through its Giveback Program, Lemonade lets you donate to programs in your community (more on that below).

The Budget-Minded
Lemonade's reputation for low premiums may make it a good fit for those looking to save money.

The Ultra-Efficient
Lemonade typically makes claim decisions and pays out funds quickly.

Should you make the switch to Lemonade? Check out the Pros and Cons BEFORE you decide.

Lemonade Customer Service:
Monday through Friday between 9:00 a.m. and 8:00 p.m. Eastern time.

Phone: 1-844-733-8666
Email: help@lemonade.com

Reasons We Like Lemonade

  • Easy Online Sign-up: Both the app and website offer simple registration using Lemonade's AI insurance bot, Maya (more on Maya later).

  • Clear, Easy-to-Navigate Website and App: The Lemonade app has an interface that mirrors the website. You can handle all related business, from signing up to making a claim.

  • Flexible Policies: Lemonade offers the ability to scale coverages up or down at any time. Changes to policies can also be made from within the app.

  • Low Premium Prices: Basic fees for renter's insurance start at $5 per month. Homeowner's insurance begins at $25 per month.

  • High Coverage Limits: Lemonade has high limits with the option to add additional coverage. For example, personal liability coverage can extend up to $1 million.

  • Discount Options: Buyers may be eligible for discounts if they live close to a fire or police station or own a burglar or fire alarm system.

Reasons to Look Elsewhere

  • Limited Availability: Lemonade currently offers coverage in 18 states and the District of Columbia. The platform is expanding to more states soon (see below for more information).

  • Relatively New and Untested Model: It's unclear how Lemonade would handle years with extraordinarily high volumes of claims, for example. With few similar companies to look to for guidance, Lemonade is operating in a new frontier.

  • No Option to Bundle: Currently, Lemonade does not offer the option to bundle homeowner's or renter's insurance with other policies, like auto insurance. These discount bundles can make the price of traditional insurance more appealing.

  • Some App Features are Slow/Awkward: The Maya A.I. can sometimes lag, and certain aspects of the app are not streamlined. For example, users must click down month-by-month to enter their birthdate.

Lemonade Coverages

These are the basic coverage options available to customers:

Reconstruction Costs
If you damage your home, insurance will cover the cost of repairs.

Personal Property Damage
Lemonade covers the damage or destruction of many personal items.

Personal Property Theft
Customers will be reimbursed for personal property stolen, regardless of where it's located. They need to file a police report, including the officer's name, precinct, and department, and the report number.

Other Person Liability
This includes medical expenses and legal fees that occur when someone else is injured and you are held responsible.

Loss of Use
This covers any living expenses incurred if you are forced to leave your home for covered reasons.

Family & Familiars Coverage
Lemonade covers all family members at no additional charge, as well as a landlord, if necessary. For an additional charge, users can add a significant other to their plan, but roommates will need to acquire their own policy.

Zero Everything
Renters and condo owners can also benefit from Lemonade's Zero Everything policy. Claimants pay no deductible for stolen or damaged items. This eliminates the need to calculate whether it's worth filing a claim.

The Zero Everything policy is good for two claims with no rate hikes, while the third one is charged a $250 deductible with the potential of future rate increases.

16 Perils
Lemonade fully pays out the replacement cost of items damaged due to the "16 Perils," including:

  • Theft
  • Vandalism
  • Fire Damage
  • Smoke Damage
  • Bad Weather Damage (Flood damage is separate)

Medical payments to others and liability insurance are included in the 16 Perils promise. If necessary, Lemonade will hire a lawyer to defend you.

Additional Coverage & Features

Lemonade also offers these coverages.

Earthquake Insurance
Only customers in Arkansas and California can add this coverage, but the company is expanding this service.

Dog Bites
Lemonade's homeowner's insurance provides coverage in the event of a dog bite as long as the dog doesn't have a history of biting and isn't considered a vicious breed.

52% of Lemonade's claims are for theft or vandalism.

What Does Lemonade Not Cover?

As with any insurance plan, not everything will be covered. Lemonade's standard insurance doesn't provide coverage for the following:

  • Power, water, or heat outages
  • Damages and costs incurred due to pests, including, but not limited to, mice and bedbugs
  • Accidental loss or damage
  • Damages and costs incurred due to floods or sinkholes
  • Damages and costs incurred due to earthquakes
  • Vehicle damage
  • Undocumented items
  • Your roommate's belongings
  • Physical damage to the building you live in (if renting)

Limited Coverage Reach

Lemonade's coverage doesn't apply to residents of all states, but as the company grows, coverage is expanding across the United States.

Standard homeowner's and renter's insurance coverage is currently available in: New York, California, Oregon, New Jersey, Nevada, Indiana, Texas, Michigan, Connecticut, Rhode Island, Ohio, Iowa, New Mexico, Wisconsin, Arkansas, Arizona, Washington, D.C., and Illinois.

Lemonade insurance is coming soon to:

  • Alaska
  • Alabama
  • Colorado
  • Delaware
  • Florida
  • Hawaii
  • Idaho
  • Indiana
  • Kansas
  • Kentucky
  • Louisiana
  • Massachusetts
  • Maine
  • Minnesota
  • Missouri
  • Montana
  • North Carolina
  • North Dakota
  • Nebraska
  • New Hampshire
  • Oklahoma
  • South Carolina
  • South Dakota
  • Tennessee
  • Utah
  • Virginia
  • Vermont
  • West Virginia

Updates about coverage availability are made on Lemonade's Facebook and Twitter pages.

How to Register

Customers can register through the Lemonade website or app (available on Android and iOS). Lemonade's AI insurance bot, Maya, will guide you through the process.

  1. Answer a series of questions.

Example questions:
  • What is your address?
  • Do you rent or own it?
  • Do you have any of the following in your home: roommates, fire alarm, burglar alarm?
  • Are you a dog owner?
  • Do you own any valuable jewelry, cameras, bikes, or fine art?
  • Are you interested in adding earthquake coverage to your policy?
  • How about portable electronics?
  • Do you currently have an active renter's insurance policy?

  1. Provide your age and email address. You'll then be asked to accept the Terms and Conditions.

  2. Receive a quote. The website will roll out a quote in one minute. You can change the coverage or add additional coverage, and it will update in live time.

  3. Approve and purchase the policy. Choose your start date and enter your credit card details to proceed.

  4. Pick your cause. Now you can choose what charity to support through the Giveback Program.

Users can cancel their policy at any time through the app. They will receive a refund for the remaining of the paid term. However, policy cancellation will eliminate any potential giveback associated with the policy.

Filing a Claim

Lemonade provides immediate, digital settlement, so claims can be settled fast. Customers submit documentation online stating the damage or what was lost. They also submit a video explaining what happened.

Lemonade's AI runs through 18 anti-fraud algorithms to arrive at a decision regarding the claim. If approved, the money will be transferred to the customer's account so they can replace the item or have property damage fixed as soon as possible.

The company pays out a quarter of claims in under three seconds, making it a good option for people who value speed and efficiency.

Lemonade Giveback Program

Lemonade is a certified B-corporation, a designation granted by the nonprofit organization, B Lab, for companies that "balance performance and profit".

Lemonade deducts expenses at a flat rate of 20% from customer premiums. Another percentage goes toward purchasing reinsurance coverage, and the remainder goes towards claims. What's left at the end of their fiscal year goes toward charity.

Lemonade's blog claims that in 2018, they donated more than $162,000 spread across fifteen charities, like the American Red Cross, Teach for America, and the New York Prevention of Cruelty to Children.

Giveback is not guaranteed in some circumstances, such as during a year of unusually high claim volume. Canceling a policy will also eliminate any potential giveback associated with that policy.

Competitors

Lemonade is the only company of its kind on the United States. Global competitors include Guevara in the U.K., TonJu Bou in China, and Friendsurance in Germany.

It's also often compared to social loan lenders Prosper and LendingClub due to their similar peer-to-peer platform.

Within the insurance industry, Lemonade competes with traditional companies like Allstate, Progressive, Geico, and Liberty Mutual.

19% of Lemonade's customers converted from Allstate, according to the Lemonade website homepage.

Lemonade's peer-to-peer platform has some clear advantages.

  • Low premiums (though not guaranteed cheaper).
  • No hidden terms meant to help the company deny claims.
  • Profits are earmarked for charity.

But purchasing traditional insurance also has benefits.

  • Live customer support.
  • Established processes.
  • The ability to bundle policies (with discounts).

Bottom Line

Lemonade is an easy-to-use platform with fair premium prices, innovative technology, and flexible policies that attract customers.

As with any insurance purchase, make sure you do your research. Compare prices and features before deciding the best company and policy for your needs.

Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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