We all know what lemonade is, but now it’s more than just a refreshing drink on a hot summer day. It’s also an online property and casualty insurance company.
The company is removing the traditional conflict between insurance companies and policyholders through a flat-fee model and is a certified B-Corp that has committed to making a positive social impact.
In this in-depth review, we will look at how Lemonade home and renters insurance works, what the policies include, and how to get a quote so you can see if it’s a good fit for you.
So, how does Lemonade insurance work?
Most companies collect premiums from each policyholder and pay claims out of the premiums they collect. The money left over after paying claims is the company’s profit.
However, this structure creates a conflict between the policyholder and the company. It is in the best interest of the company’s shareholders to pay out as little as possible through claims so they can make more money.
As a result, policyholders are often put through long, tedious claim processes and perceive insurance companies as stingy.
Mutual insurance model with a new twist
Lemonade is changing up how that works through a mutual insurance model with a twist. The company charges a flat fixed fee of 20%, which is taken out of the customer’s monthly payments.
The remaining 80% is used to pay reinsurance, expenses, and claims. Then– here’s where it gets really good– any money left over is donated to a cause that the policyholder chooses each year.
Policyholders are grouped into pools based on the causes they choose, and the group’s premiums are pooled together to pay out claims. Any money left over at the end of the policy year will be donated to the cause.
Note, the donations will not be tax deductible for policyholders. If you’re interested in Lemonade, you can sign up online or through the mobile app (iOS and Android).
Lemonade home and renters insurance
If your home is damaged due to a covered peril, the Lemonade home insurance policy pays the reconstruction costs (up to your policy limit).
There are 16 covered perils such as fire and smoke, water damage (not from floods), crime, vandalism, and bad weather.
The policy also covers your living expenses if you can’t live in your home as a result of a covered loss.
Liability protection is included in Lemonade’s home and renters insurance policies. If someone claims to be injured or has damaged property due to your alleged negligence or actions, Lemonade hires a lawyer to defend you. Additionally, if you are found liable, it pays for the damages up to your policy limit.
Personal property coverage
If your covered personal property is stolen, Lemonade’s home and renters coverage reimburses you for the replacement cost of your items. The replacement cost is the current and lowest as-new market value.
Your personal property is covered in your home, and anywhere else in the world it may be. However, belongings stored in self-storage lockers are only covered up to $1,000 or 10% of your personal property limit, whichever is greater.
If you need additional coverage, you can send Lemonade a note with the appraised value of items you want to ensure and the company will send you a quote. Extra coverage can cover fine art, jewelry, camera, bicycles, and musical instruments.
Note, your standard policy does not cover if you lose something, but you can add additional coverage that protects against loss, as well as damage and theft.
Lemonade home and renters insurance policies are currently available in California, New York, Nevada, New Jersey, Georgia, Texas and Rhode Island, and just renters insurance is available in Illinois and Ohio.
The company is expecting to roll out to more states in the coming year, so if yours is not yet listed, keep checking back.
Once you have Lemonade home or renters insurance, it covers the policyholder and all residents of a household who are related by blood, marriage, or adoption. You can add your family’s names at no extra charge.
Note, you will be responsible for ensuring your policy limits are set high enough to cover your entire family’s belongings.
To add an unrelated significant other, you will need to pay an additional cost.
How is the premium calculated?
Each policyholder’s premium will depend on several factors, such as:
- Recent claims
- Credit history
- Property specifications (age, size, and construction quality)
- A home’s vulnerability to damage from fires, windstorms, severe weather
- Installation of protection equipment
- The size of your deductibles
All of these will be evaluated to determine your premium. The costs are said to be low with a typical renters policy costing $5 per month and a typical homeowners policy costing $25 per month.
When signing up for Lemonade, you will choose how much you want to pay for your deductible. The company offers a ‘Zero Everything’ product in which policyholders can receive two claim payments per year without paying a deductible.
Further, the claims will not result in a rate hike. After the first two claims, the policyholder would have a $250 deductible for subsequent claims and any additional claims could cause a rate hike upon renewal.
How do you file a claim? You open up the Lemonade mobile app and click “Claims.” You will be guided through the short process during which an AI runs 18 anti-fraud algorithms.
Your claim will either be approved instantly or handed off to a human for manual review. When the claim is approved, the money can be wired directly into your bank account.
Lemonade aims to settle claims as quickly as possible so the majority of simple property claims will be paid right away. 25% of claims are paid in three seconds. However, some will take longer to settle such as if the policyholder has made multiple claims or if some information is missing.
Claim emergencies are claims in which policyholders need temporary housing or immediate assistance (such as water or fire cleanup). Lemonade has an emergency response team that can respond to almost any incident, 24/7.
Get an insurance quote from Lemonade
Want to see how much Lemonade’s policy will cost you? You can quickly get a quote on the Lemonade website. Answer a few questions, agree to the terms of service, and you’ll be all set.
Once you have your quote, it’s a good idea to compare it with at least two other quotes. To easily do so, head over to SuperMoney’s Home Insurance Review Page.