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Powered by AI, this mission-driven digital insurer is reshaping the industry one policy at a time.
The trillion-dollar insurance industry has been seemingly untouched by innovation for more than a century. A combination of rising rates and poor support can make even veteran policyholders worry whether providers will even pay out a claim when it’s needed most.
The all-digital Lemonade is a new insurance company that’s set out to change the game. Here’s what you should know about this refreshing provider.
- Homeowner's monthly rates start at $25
- Renter's monthly rates start at $5
- Fast claims
- Easy to use
- Available only in 8 states
- Homeowner's monthly rates start at $25
- Renter's monthly rates start at $5
- Flat fee
- Fast claims payouts
- Not available in every state: Only offering renters, condo and homeowners insurance in New York, California, New Jersey, and Nevada; renters and condo insurance in Texas and Rhode Island; and renters insurance in Illinois and Ohio
- No live chat
- No agent locations - completely online or in-app
What is Lemonade?
Lemonade believes today’s insurance industry is set up to encourage insurers to deny claims, keeping more money in their own pockets.
Not so at Lemonade, a private insurer founded in April 2015 on a business model driven by social good. Unlike your typical insurer, Lemonade has no incentive to deny paying your claims. Rather, Lemonade claims to treat your premiums as if they’re still your money.
Powered by machine learning, Lemonade is innovative because it cuts out the middleman to sell policies directly to consumers. And its approach is entirely digital: Rather than work with brokers and paperwork, you can apply and submit a claim online or through a free app.
How does Lemonade work?
Lemonade’s structure reflects the “sharing economy” of a peer-to-peer framework. What that means specifically is that Lemonade groups the premiums of small “peer groups” into a collective claims pool. It takes the money from that pool to cover any claim.
Its revenue model is equally transparent: Lemonade takes a fixed 20% fee from your monthly premium for its services, using the remaining 80% of your money for the unavoidable expenses of the insurance business. Once a year, it applies any leftover money you’ve paid toward a “Giveback” — Lemonade’s term for a donation toward a common cause that betters society.
By digitizing the experience of buying insurance, you can apply online in minutes, with any claims paid instantly. In fact, the company broke a world record in 2016 with a claim payout it processed in three seconds.
Lemonade calculates your premiums similarly to other insurers, basing its rates on your credit and insurance history, property details and add-ons. It claims to undercut its competition by up to 82%, offering renters insurance that starts at $5 a month and homeowners insurance from $25 monthly.
What products does Lemonade offer?
Lemonade offers renters and homeowners insurance policies with a long list of options to extend your coverage.
Basic insurance policies offer:
- Homeowners insurance
- Renters insurance
- Condominium insurance
- Co-op insurance
After you decide on a policy, you can select extra coverage for jewelry, bikes, cameras and other valuables. You’re then presented with policy options — like adding a spouse or landlord — and a series of deductibles before you confirm your policy.
Zero Everything product
Lemonade offers a special Zero Everything product that allows renters and condo/co-op owners to “undo” losses. Whether you’ve had your bike stolen or your laptop ruined by a burst pipe, policyholders with Zero Everything can receive claim payments with no deductible, meaning you’ll get the full amount to replace your belonging. You can have up to two claims per year under this product without seeing a rate hike.
What does a Lemonade policy cover?
All policies cover insurance’s standard “named perils” — theft, fire, frozen pipes and more — as well as a little more to cover the results of those bad things, like hotel costs if you can’t immediately return to your home.
However, your standard Lemonade policy won’t cover:
- Earthquakes. If you live in California, you may be able to add coverage for quakes.
- Vicious dog attacks. You’re covered if your dog bites someone, but only if your dog isn’t considered a “high-risk breed.”
- Flooding. Policies don’t cover structural or personal property damage caused by floods.
- Roommates. Renters policies do not cover your roommates’ belongings or personal injuries.
How do I apply for Lemonade insurance?
Applying with Lemonade doesn’t require a broker, an agent or even paperwork. Easily apply online or through Lemonade’s app in minutes:
1. Visit Lemonade’s site or download the free Lemonade app. Click Check Our Prices.
2. Lemonade walks you through the process of submitting your personal details, your insurance needs and the specifics of your coverage.
3. Lemonade’s algorithm analyzes your information and returns a quote and sample policy within minutes. After it gives you a quote, Lemonade provides a coverage summary for your review. Policies are flexible, allowing you to adjust your deductible, extra coverage, start date and more.
4. Simply adjust the sample policy to meet your preferences, then click Pay. That’s it.
How do I file a claim with Lemonade?
To file a claim with Lemonade, you must download the free app:
1. Open the app and tap Claim.
2. Follow the instructions to inform Lemonade about your specific situation.
3. Lemonade checks your claim against its fraud algorithms, either approving or passing your claim along to its claims team.
4. After your claim is approved, you provide your banking details for a deposit.
The company boasts that it pays more than 25% of its claims in under three seconds. Most claims are handled by Lemonade’s AI and backed by a devoted team of experts to help with situations where approval requires more time.
The company doesn’t advertise how many claims it’s handled through AI, but as its bots become stronger, Lemonade’s goal is to automate at least 90% of its payouts.
What stands out about Lemonade?
Compared with its competitors, there’s so much that stands out about this new digital insurer.
- Easy to use. Streamlined online quotes, a hassle-free website and approval in under three minutes leaves little room for improvement.
- Speedy claims. Nearly instantaneous claims are handled by AI through a free app, backed by a dedicated team that stands ready for questions or issues.
- Competitive rates. Without brokers or branches, Lemonade can afford to offer rates that are typically lower than its competition.
- Flexible coverage. All policies offer solid coverage, and any exclusions are made clear before you purchase your policy. And you can easily extend your coverage, adjust your deductible and more online or through the app.
- Transparent model. Designed as a fair alternative to your typical premium, Lemonade takes 20% of your monthly payment as profit, puts 40% toward reinsurance and other costs and pays claims with the remaining 40% — leaving no incentive to deny claims.
- Annual “Giveback.” The company donates unused premiums to nonprofits of your choosing. Its first annual “Giveback” in 2017 donated more than 10% of its revenue.
- Financial stability. While Lemonade seeks to reinvent insurance from the ground up, some elements are reassuringly familiar. It’s reinsured by some of the most trusted, stable financial institutions in the world.
Where does Lemonade fall short?
Lemonade does a lot of things right with its modern twist on property insurance, but there are a few sour notes to look out for.
- Not available in every state. As of this writing, Lemonade is available in New York, California, Illinois, New Jersey, Rhode Island, Texas, Nevada, Georgia and Ohio. Nine states ain’t great if you live elsewhere.
- No live support for prospects. While its application process is straightforward, Lemonade offers no live support for questions or concerns. It relies on email, which might not cut it for some customers.
- Newer P2P model. P2P is relatively new, especially for the insurance industry. While the potential benefits are clear, they aren’t guaranteed. Fraudulent claims and dishonest peer groups are possible.
- Limited discounts. While the company offers discounts for protection equipment you may have installed, like fire and burglar alarms, it doesn’t have the range of discounts you may find with other insurance companies.
- “Giveback” isn’t guaranteed. The company’s claim to fame — its annual “Giveback” — isn’t guaranteed. If Lemonade pays too many claims or its reinsurance company wants to increase profits, there’s no telling how much (if any) money will be donated.
- Can’t bundle policies. While other insurers allow you to bundle your auto and homeowners insurance together in order to get discounts and make one monthly payment, Lemonade doesn’t offer auto insurance, which means this isn’t an option.
It’s a newer company, sure. But Lemonade’s refreshing take on property insurance sure is sweet.
Making waves for its unbiased revenue model, Lemonade offers competitive rates, lightning-fast approvals and nearly instant claim payouts. But while it plans to roll out services in additional states, it’s available in New York, California, Illinois, New Jersey, Rhode Island, Texas, Nevada, Georgia and Ohio only.