Money at 30: Lemonade Renters Insurance Review

For as long as I’ve written this column, I’ve been a big advocate of renters insurance. Unfortunately, despite my best efforts, it seems the majority of apartment dwellers and the like still don’t carry policies to protect their belongings. Luckily, Lemonade is trying to change that by not only making it easier to obtain a policy but also flipping the script on the insurance model.

Let’s take a look at what Lemonade is, how their policies work, and how you can apply for coverage:

How Lemonade Renters Insurance Works and What Makes Them Different

About Lemonade

Lemonade is quick to point out the inherent conflict of interest that exists in the insurance industry. The way traditional insurance companies profit is by collecting your premiums and hopefully not having to pay out any claims. Obviously this isn’t a simple problem to fix, but Lemonade does have a few ideas.

First of all, instead of holding onto unclaimed funds as profit, Lemonade instead takes a flat fee from premiums paid, uses the rest of money to pay out claims, and donates any leftover funds to charity via their Giveback program. In 2017 that leftover cash amounted to $53,174 going to charity while that figure rose to a whopping $162,135 in 2018. Additionally, Lemonade is a registered Public Benefit Corporation and a Certified B-Corp.

Although Lemonade once described their business model as peer to peer insurance, it seems they’ve phased out that phrasing. While you can still hear it mentioned in the 2016 “Science Behind Lemonade” video linked on their homepage, it doesn’t show up in many other places. However, in their FAQ, they do still reference peer groups in terms of their Giveback program.

Lemonade insurance policies: what’s covered and what isn’t

As we’ll discuss later, Lemonade does a commendable job of disclosing what their policies cover.

Losses due to the following are covered under Lemonade’s renters insurance policies:

• Fire and smoke
• Wind, lightning, and hail
• Crime and vandalism
• Water/burst pipe

It also covers medical payments to others as well as liability.

However, losses due to the following are not covered:

• Floods
• Earthquakes (although additional coverage is available in California and Arkansas)
• Dog bites from “high-risk breeds”

Additionally, Lemonade notes that their policies do not cover items you lose nor does it apply to the belongings of your roommates — although you can include your spouse in your policy for free or add a “significant other” for an additional fee.

It should also be noted that Lemonade offers replacement cost coverage as opposed to actual cash value. This means that your payout will be equal to the current as-new market value of the items you’re claiming. For example, if you file a claim for an iPhone X, your payment will allow you to purchase a new one — but keep in mind that, if you paid $1,000 for the phone originally but it now sells for $900, your payout will only be for $900 (minus your deductible).

Lemonade premiums

Like any insurance product, your monthly premium with Lemonade will depend on a number of factors, including your location, the amount of coverage you need, and more. However the company notes that renters insurance policies start as low as $5 a month. Meanwhile the site also offers homeowners insurance, with policies starting at $25 a month.

Switching to Lemonade

If you’re already insured and want to switch to Lemonade, the company says they’ll take care of the hassle for you. In their FAQ they write, “If you’re a renter, we’ll simply ask for your current policy number and insurer, and email your provider notifying them of your change in policy. If you’re a homeowner, we’ll notify your lender and handle your escrow payments (if relevant) to switch you over seamlessly to Lemonade.”

Applying for Coverage on Lemonade

Where Lemonade offers coverage

Before we dive into Lemonade’s application process, I should note that coverage is currently only available in a select few states. In fact, when I went to obtain my quote, I discovered that Missouri is not yet one of those states. In any case, Lemonade is making its way across the country and has its sights set on being nationwide. If you (like me) learn that Lemonade is not yet available in your state, you can enter your e-mail address to get updates from the company. Just last month, the company rolled out in Colorado and released this updated map showing where they now operate:

As of July 1st, 2019

The application process

As I mentioned, Missouri is not one of the states where Lemonade currently offers coverage. Luckily, Arizona was so I entered my brother’s address to at least get a feel for the platform. What a found was a super simple process including an easily customizable quote.

To obtain a quote on Lemonade, all I needed to do was answer a few basic questions such as where I lived (or was pretending to live, as it were), if I had any roommates, if I had any expensive electronics, etc. Lemonade then used this data to provide me with a basic monthly quote. However, what’s nice is that they clearly label each element of your proposed policy and allow you to make changes. Plus, almost immediately after you edit an element of your policy, your quote will update to reflect the new price — it’s pretty nifty.

Coverage options

There are five main Coverage Amounts you can adjust when applying on Lemonade:

• Personal Property
• Portable Electronics
• Personal Liability
• Loss of Use
• Medical Payments to Others

On top of that, you can purchase additional riders for things like:

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

Perhaps the most important option you can select when setting up your policy is your deductible. As a reminder, this is the amount you’ll need to pay out of pocket before your coverage will kick in. So, if you make a claim for a $1,000 laptop and have a $500 deductible, your payout will be $500. For the policy I was looking at, Lemonade allowed me to select a deductible as low as $250 and as high as $2,500. Something to note is that lowering the deducible from the highest to the lowest level only increased the premium but a few dollars a month. Therefore you’ll want to carefully consider which option is right for you.

Like I mentioned earlier, Lemonade allows you to add a spouse to your policy for free. Meanwhile, if you wish to include a significant other’s belongings in your policy, your premium will likely increase slightly. On a separate note, you can also add a landlord, property manager, or other “interested party” to your policy for free.

Understanding your policy

Continuing the application process, before you actually purchase your policy, Lemonade does a great job of laying out exactly what’s included and what is not. They also provide definitions and examples for each coverage option so you can better understand them. Moreover, the site has an extensive FAQ section where you can get more insight if you have any issues. I was also impressed by how they plainly explain basics like deductibles, replacement cost, and other insurance terms that not everyone might be as familiar with.

That said, even with how clear Lemonade aims to make things, there is still room for a bit of confusion. For example, while they cover loss due to “bad weather” and “water damage” by default and you can add “water back-up” coverage, damage from floods is not covered. To the average person, this certainly leaves some grey area as a burst pipe could cause flooding, although not the kind Lemonade is referring to. My best advice would be, if you have any questions, contact Lemonade so they can help give you a better idea of what your coverage includes and prevent any surprises.

Activating your policy

Once you’re ready to buy, you can click the button under “Activate Your Insurance” to make it official. All you’ll need to do is select what day you’d like your policy to take effect and enter a credit or debit card number for payment. Note that I didn’t actually complete this step as I didn’t feel like gifting my brother with renters insurance but I would presume that doing so would complete your purchase.

Final Thoughts on Lemonade

Overall, I was impressed by Lemonade’s transparent policy purchasing process. On top of that, their business model sounds like one I’d like to support. Of course, with them not yet operating in my area, it’s hard to say for sure whether or not I’d consider making the switch from my current Assurant policy.

For context, I currently bundle my renters insurance policy with my auto insurance, yielding a discount on both. While I was unable to obtain a quote for my current home, the figure I obtained for my brother’s place was right in line with the price and coverage I currently have. That said, I don’t think my current insurer is donating a portion of their profits to charity, so that’s definitely something to consider.

The bottom line is that, if you’re looking for renters insurance (and you should be if you don’t have it already), Lemonade could be a great option. Now if only they’d hurry up and launch in Missouri…

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Originally published at Dyer News.