AI-powered insurance company Lemonade Inc (NYSE:LMND), which recently raised guidance for the fiscal year, is working more closely with Tesla Inc (NASDAQ:TSLA) vehicle owners to insure their vehicles. Could the move pay off?

• Lemonade stock is trading near recent highs. What’s ahead for LMND stock?

Lemonade's Pitch to Tesla Owners

Tesla offers its own in-house insurance program, which has often offered less expensive coverage than vehicle owners shopping elsewhere. That program is not available in all states, leaving some to look for other options.

Enter Lemonade, an AI-powered insurance company that uses data to provide customized rates.

The company recently shared that Tesla owners in the states of Arizona, California and Oregon can now directly connect their vehicles using the Lemonade app. Lemonade said that customers who do this won't need telematics devices.

Lemonade's pitch to Tesla owners said that they will get better customer experience with the company alongside smarter pricing.

"This is a game-changer for smarter, seamless experiences and we're just getting started! More states coming in 2026," Lemonade tweeted.

Lemonade typically ships a UBI device used to collect data for coverage of pay-per-mile insurance plans. Through connecting with Tesla vehicles directly, Lemonade will be able to offer lower prices.

According to Lemonade's website, the company's average monthly insurance for a Tesla vehicle is $32 to $41 per month. Prices depend on a user's driving history and the vehicle model.

Not all insurance companies offer insurance on Tesla vehicles and many charge more for coverage of vehicles from the electric vehicle giant due to repair costs.

Read Also: Tesla Q3 Highlights: Record EV Deliveries, Falling Profits, AI Ambitions Ahead

Lemonade Pitches FSD Insurance

Lemonade's latest pitch to Tesla owners comes shortly after one was made to offer insurance on full self-driving (FSD) miles.

Lemonade co-founder and President Shai Wininger recently said that the insurance company would be "happy to explore insuring Tesla FSD miles for (almost) free," as reported by Teslarati.

The pitch could become a unique model for the insurance sector that would help Lemonade collect data and encourage Tesla users to utilize their FSD.

FSD, which can be purchased for a one-time fee or with a monthly subscription, could become cheaper for Tesla owners under the Lemonade plan if approved.

Teslarati said that data shows FSD could be safer for vehicle owners, with FSD driven miles nine times less likely to be involved in an accident versus the average in the U.S.

Tesla Insurance Unique

Tesla offers its own insurance program, which is available to U.S. vehicle owners in 12 states, with a potential 13th on the way.

Here are the states where Tesla owners can insure their vehicles with Tesla Insurance:

• Arizona
• California
• Colorado
• Illinois
• Maryland
• Minnesota
• Nevada
• Ohio
• Oregon
• Texas
• Utah
• Virginia

Benzinga shared in October that Tesla could be adding Florida to the list, which would be the first new state launch in three years.

Tesla first launched its insurance business in 2019, becoming the first company to provide coverage directly to its own customers, eliminating the need for third-party insurance companies.

The EV giant uses a Safety Score for drivers based on factors such as hard braking, aggressive turning, excessive speeding, unbuckled driving, late-night driving and unsafe following to calculate pricing rates on an individual basis.

Georgia and New Jersey have been named as states where Tesla could launch its insurance. The EV company also opened an office in Europe with plans to expand its insurance operations there, but nothing has materialized to date.

Data from S&P earlier this year revealed that Tesla's insurance business could be a money loser for the company.

The report showed Tesla Insurance with a loss ratio of 92.5% in 2023, meaning the company paid out 92.5 cents in claims for every $1 it got from customers in premiums.

While this would represent a typical profit, the figure does not include overhead costs for Tesla, items such as employee salaries, rent and other costs.

When put together, Tesla Insurance is likely losing money, according to the report.

Reports this year also suggested that Tesla owners are facing rising insurance premiums due to a spike in vandalism targeting the company's vehicles.

Read Next:

• Here’s How Many Vehicles Tesla Has Delivered, Produced In Each Quarter Since 2019

Photo: Del Harper via Shutterstock