Lemonade Insurance Review: Home & Renters Insurance With No Incentive To Deny Your Claim?

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lemon_logoUpdated July 2018. Lemonade continues its rollout – see map above. Get a free quote from Lemonade and see if they are cheaper than your current homeowner’s or renter’s insurance policy. Feel free to leave a comment about whether they were more or less expensive at the same coverage and deductible level.

Right or wrong, many people view insurance companies with suspicion. Even though you pay them money every month for protection, you worry if you’ll actually get paid when you experience a problem. The problem is that with most insurance companies, every dollar they don’t pay you ends up in their pocket. The incentives are not aligned. Will they find a reason to deny your claim? Will they make it such a pain that you’ll just give up? Recall the Insuricare scene from the movie The Incredibles.

Lemonade is a new insurance company that takes a flat cut upfront, and the rest is put aside to payout claims. They are starting out with homeowner’s and renter’s insurance. The specific breakdown is below.

  • 20% to Lemonade.
  • 40% into a pool to pay out for claims (or charity).
  • 40% to reinsurance in case that pool is exhausted (catastrophic cases).

Reinsurance is basically what is sounds like – insurance for insurance companies. This provides additional safety that there will be money to pay out your claim in cases of catastrophic losses (i.e. certain natural disasters). Examples of reinsurance companies are Lloyd’s of London and Berkshire Hathaway.

If there are fewer claims than expected, Lemonade will donate the money to a charity of your choice. Therefore, they have no direct incentive to deny a valid claim. In turn, hopefully their customers will also not make false claims because they will only be taking money away from charities and not the big bad insurance company. When signing up, you even take a “honesty pledge”. Here’s how behavioral economist Dan Ariely, who is their “Chief Behavioral Officer”, puts it:

Knowing that every dollar denied to you in claims is a dollar more to your insurer, brings out the worst in us all… Since we don’t pocket unclaimed money, we can be trusted to pay claims fast and hassle-free. As for our customers, knowing fraud harms a cause they believe in, rather than an insurance company they don’t, brings out their better nature too. Everyone wins.

Lemonade is also structured as a Public Benefit Corporation (B-Corp), which makes it the “World’s Only Public Benefit Insurance Company”.

Update: In July 2017, TechCrunch reported that Lemonade made its first annual donation of $53,174 or 10.2% of first year revenues. So that’s 10% out of the 40% pool reserved for claims (or charity).

Lemonade also saves money with tech start-up tricks. No human salespeople. No brokers. No physical branches. Apply online. File your claim online. You can do nearly everything via smartphone app (iOS and Android) with a chat-based AI interface. (Fewer adjusters and customer service reps.) If you have to file a claim, you can take a video of the damage using their app and explain the situation.

It remains to be seen if they can truly disrupt the industry. In the meantime, they need competitive premiums. Uber would not be so successful if they weren’t also cheaper than traditional taxis.

Live Policy and Zero-deductible option. In September 2017, Lemonade rolled out a new option with a zero deductible. If you pick this option, you won’t have to pay any deductible and thus get the full value of even a smaller claim like a $250 bike or smartphone. Importantly, Lemonade also promises not to hike your premium after making a claim (you are limited to two claims per year). You can preview how much this option changes your premium with their “Live Policy” system where you can make changes to your policy instantly via the Lemonade app.


As of July 2018, Lemonade offers renters, condo and/or homeowners insurance in Arkansas, Arizona, California, Connecticut, District Of Columbia, Georgia, Iowa, Illinois, Maryland, Michigan, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Wisconsin. Get a free online quote from Lemonade and compare with what you have now. Prices start at $35 $25 a month for homeowner’s insurance and $5 a month for renter’s insurance.

Also see: I asked for more clarification on how Lemonade differs from mutual insurance.

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  1. That sounds like an awesome premise – I suppose it’s too much to ask that we get to claim the tax deduction on the charitable donation as well but I love the idea anyway. 🙂 I hope they’re successful and make it out to California.

    • I’m in California and just signed up for a renters insurance policy. The app also said that homeowners was available starting at $25 rather than $35 as listed in the article.

  2. This is similar to Usaa but instead of charity they give you a rebate

  3. I’m not sure those rates are very competitive – but I guess you are saying it is only for New York. In the Midwest, rates are much better than their “lows”.

    • I live in NYC and just checked the rates and mine is still better. Although I Geico (which uses Assurant) and maybe I get a multi-policy discount.

  4. Thanks for sharing – I like their feature that they will alert you when they are in your area. They say they expect to be able to cover 97% of Americans by 2017 which is pretty bold.

  5. Sounds good in theory, but even Lemonade will likely be forced to “review with suspicion” any claim made in order to prevent the initial pool from being exhausted pre-hazardous claim pool – otherwise their reinsurance rates would be through the roof.

    Every insurance company, whether Lemonade or some other one, will evaluate a claim made first with whether it should be denied.

  6. Brad Ford says

    While it is a nice marketing story, Mutual Insurance Companies (ex: State Farm) exist for the sole purpose of serving their customers. Any “profit” generated is used for two purposes (1) dividends to policyholders (aka the owners) or (2) building up capital to ensure they have enough money to pay claims. State insurance departments strictly regulate capital levels.

    Lemonade is simply using the reinsurance to reduce the amount of “capital” that they would need to write business.

    Furthermore, the idea that they have eliminated the incentive to underpay claims is false.
    1) if their loss ratio exceeds 80%, they are going to lose money
    2) if their loss ratio is > than expected, their reinsurance costs will skyrocket.

    Finally, companies like State Farm, USAA, and Nationwide benefit from economies of scale and decades of experience. Lemonade will struggle to keep expenses down.

  7. I am not an insurance expert, but which mutual insurance companies provide dividends for homeowner’s and renter’s insurance? I know some car insurance companies do, but the from a quick Google search, the last time State Farm paid auto insurance dividends was 2007. I’ve had State Farm homeowner’s insurance for the last decade and don’t remember any dividend checks. It appears that USAA has a better record of paying out dividends for car insurance, but I also couldn’t find any announcements about home insurance.

    If there are mutual fund companies that pay out dividends on homeowner’s and renter’s insurance, it would be interesting to see the numbers.

  8. I have been using them for 4 months now in long island city, nyc. cheaper rates than i could find elsewhere, state farm, nationwide, assurant, travelers. they have been very prompt on responses to all my questions thus far. more competition cant be a bad thing for the consumer

  9. Answered the questions to get a quote. I have had no claims. They declined to quote for my owner-occupied home in California. No explanation given.

  10. Ran quick quite to compare with my expiring renter’s insurance from Geico/Stillwater. Premium came up the same.

  11. Living in an apartment co-op in NYC. State Farm came up about $30 cheaper than Lemonade. Maybe there’s something more they offer that I’m not getting with State Farm? Hmmm.

  12. kimberlykahuna says

    NO NO NO NO AND NO . Take note, most positive reviews are from those who don’t actually use this garbage excuse for an insurance company. I was just told that items that were stolen from me while traveling WERE NOT COVERED . A similar situation happened unfortunately a few years ago , and Allstate cut me a check within 24 hours. To add insult to injury, they do not have a phone number, so you are stuck dealing with bots and sending messages through their app – not even a website… THEIR APP. For sure its cheap and easy to sign up , but when the sh*t hits the fan, YOU WILL NOT HAVE ANY PROTECTION . Somehow I received no copy of my policy, anywhere during signup .

  13. Research the company before getting policy. They have horrible claim process and doesn’t pay out in 3 minutes. Not even 4 weeks. They will say ooh we will pay you in 24 hours. I call. I email. No response. then 3 weeks later, we need more information and we need to inspect property. I already replaced everything and fixed everything. Then I call to speak to worker. He had an attitude and asked if I’m black. I said let me speak to supervisor. He said I’m the supervisor. He hung up and he continued to call and email me when I final stated I will call the police if you don’t stop contacting me. Thanks anyway fake insurance

    • If you really had that much of an issue, most states have laws as it relates to bad faith denial of an insurance claim. Look it up/talk to an attorney, especially if it’s a significant amount.

      Generally you see it with auto accidents (ie catastrophic personal injuries) but it also happens sometime with homeowners (think Hurricane Katrina). Basically, if you make an insurance claim pursuant to the law’s details in your state, the company denies it, and you sue them and prove that it was a valid claim, you generally will recover your claim, attorney’s fees, and a punitive damage.

      This is part of the reason I’m suspicious of this company – if they go lean on the claims department, they will end up getting stuck with a lot of bad faith denial of coverage lawsuits.

  14. I wonder about the “two claims per year” limit. Say your basement floods in Jan., and have a bike stolen in July, Are you out of luck if your house burns down in Dec.?

    • Good question. I contacted Lemonade and this was their reply. If there are more than two claims a year, the third claim (and subsequently thereafter) will automatically have a $250 deductible tied to it, and upon renewal, this third claim will be counted towards a possible rate hike.

  15. Something is not right. Tried to get a quote in Illinois but it did not work and said it would launch soon.

    • How far did you get through the process? I just did a renter’s insurance quote for an apartment in Chicago and it went through fine. Got a quote for $7.25 a month.

      Maybe it’s not live in all of Illinois? They pull a lot of info from databases to be able to give out an instant online quote.

      • It took name and address only. Perhaps not all counties/zip code are covered.

        • same situation here. After entering home address, it gave below message.

          We’re launching homeowners insurance in Illinois very soon
          Leave your email below and I’ll ping you when we’re ready

  16. I’m a homeowner in CA who liked the idea, but unfortunately their quote was much higher, with less coverage, than my current policy with Liberty Mutual.

  17. Thanks for the suggestion. I just submitted a quote for renters insurance and received a quote of $9/month. My current insurance (Liberty Mutual) is charging $15/mo for equivalent insurance. I’ll give it a try in spite of the several negative experiences above and will report any problems I experience. I received the policy instantly via email.

    I imagine they save some money on overhead without as many agents and offices. This could account for the problems contacting customer service and getting claims processed expeditiously.

  18. Dangerous terms and conditions from Lemonade, they can alter anything anytime and you’re screwed.

    We reserve the right, at our discretion, to modify these Terms from time to time, which modification will be effective upon the posting of the modification to our App/website (collectively, “the App”), and will apply to causes of action arising after the effective date of the change. You should continue to check the App for changes. Your continued use of our App or otherwise the Services following the posting of changes to these Terms will mean that you accept those changes.

    • Insurance is a highly-regulated industry. I’m also annoyed by the boilerplate fine print for stuff in general, but an insurance company certainly can’t “alter anything anytime” in regards to your policy.

  19. Minh Nguyen says

    I’m very disappointed with the service.

    I filed my claim on June 20th.

    It’s been almost 3 weeks and I feel like I’m still running around in circles with Lemonade’s chatbots and customer service reps.

    I send in information that my Lemonade rep asked for, and later on, she asks me for the exact same information. Many times, 2-3 business days go by without any response.

    I’ve tried calling my rep on at least 3 different days and times, and I never receive any response.

    I signed up because I thought that Lemonade was different, or at least that’s what they claim to be. But as I did more research online, I found that many others have had the same experience.

    Based on the many good reviews (which is why I signed up in the first place), I hope that my experience isn’t typical.

    But as it stands, I cannot recommend Lemonade, and anyone who reads this review – you’ve been warned.

  20. Lisa Turner says

    Exactly. I had a burglary of my home & I have been trying to work with a dang bot since April 13, 2018 & as of today NOTHING has happened. Lemonade had all the info they required & the full police repoer, photos, video & pictures yet still nothing. I cannot get anyone on the phone!!! Do not use Lemonade I pay $31 per month for nothing.

    I am currently seeking out an attorney

  21. Got an email from them that they now offer homeowners insurance in my area (north Texas) so I requested a quote. Didn’t dig into it too much but at first glance their prices were about 30% higher than my regular insurance. Disappointed with this and especially considering that now I have a responsive agent who I can go to for any issues, I think I’ll skip.

  22. its been 3 months i had somethings stolen out of my home and i filed a report had receipts to the items stolen spoke with an adjuster gave them everything lemonade needed to make this claim. To find out i got a phone call from another adjuster different from the first one call me wanting to come out and get another statement from me and involved someone who wasnt there or hAd anything to do with the case/claim. So i called the original adjuster that first came out told him what was happening and he spoke up for me but since then No response every time i call or email or anything no one wanted to give me an update on where we stand 1 week 2 days later this is there response …..

    Hi Michael,

    Apologies for the delay. I am still pending the finalized report from the field investigator. Sometimes this can take a week or two while the report is verified and proofed by the case manager assigned before they send it over to us. Appreciate your patience in the matter. …

    2 weeks have gone by since …..still they failed to communicate with there customer im very disappointed…..pissed off more like it……DONT USE LEMONADE AS YOUR INSURANCE YOU WILL BE DISAPPOINTED……there other customers just haven’t had an incident to be disappointed just yet.

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