Lemonade: Fossil Free Insurance Review

It is not a secret that nearly all large insurers both insure and invest in fossil fuel projects. Lemonade is the only insurer that has committed to being fossil free. But is it reliable?

SustainFi July 26, 2021

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How is the insurance industry supporting fossil fuels?

It is not a secret that insurance companies are some of the top investors in fossil fuels, such as oil, coal, and gas. Every time you buy car, home, or health insurance, insurance companies collect premiums, which they invest. According to Insure Our Future, the top 40 U.S. insurers have over $450 billion invested in oil, gas, and coal companies.

Besides, insurance companies underwrite fossil fuel projects, covering accidents like explosions. You can’t drive a car without insurance. Likewise, companies need insurance to drill for oil. As a result, insurers could make a difference if they stopped providing coverage for these projects.

Is the insurance industry’s stance on fossil fuels changing?

Due to public pressure, the tide appears to be turning, though mostly outside the U.S. Lloyd’s, the world’s biggest insurance market, will stop selling new insurance to cover coal, oil sands, and Arctic energy projects by 2022. Most European and Australian insurers no longer cover new coal projects.

In the U.S., a group of 60 businesses, including Patagonia and Ben and Jerry’s, recently urged insurers to stop underwriting oil and gas companies. In addition, large U.S. insurer Chubb said it would no longer underwrite new coal projects starting in 2022 (with some exceptions.)

According to the Harvard Business Review, not insuring the fossil fuel industry may actually be good for insurance companies. The largest losses for the insurance industry over a 30-year period came from the oil and gas industry. Today, wildfires, floods, and hurricanes are costing the industry billions of dollars. In 2018 alone, weather-related disasters created over $160 billion of damages, of which half was insured.

Is your insurer supporting fossil fuels?

Most likely, yes.

All major U.S. insurers invest in and underwrite fossil fuels. According to Insure Our Future, U.S. insurance companies like AIG, Liberty Mutual, and Travelers are the top underwriters of the oil and gas industry.

If you want to look up how much your insurance company is investing in fossil fuels, you can find out here by entering your insurer’s name in the “Company Name” field.

If you want insurance from a company that doesn’t support fossil fuels, you don’t have many options yet besides Lemonade.

Fossil free insurance with Lemonade

Only one U.S. insurance company, Lemonade, has committed to never investing in or underwriting fossil fuels. Founded in 2015, Lemonade is a full-stack insurance company. It is listed on the New York Stock Exchange under the ticker LMND and has over one million active customers.

In addition to banning fossil fuels, Lemonade has called on other big insurers to do so, though it remains to be seen if they will follow.

Lemonade is a certified B Corp and a Public Benefit Corporation. B Corps are for-profit companies that commit to balancing profits and purpose. Public Benefit Corporations are legally required to consider the interests of communities and employees in addition to business owners.

Beyond banning fossil fuels, Lemonade is unique because of its business model. Most insurers take payments (or premiums) from customers, pay expenses and claims at the end of each year, and keep the rest as profit. This creates a conflict of interest between insurers and their customers: whenever insurers pay out a claim, they make less profit. This incentivizes them to reject as many claims as possible.

Lemonade does things differently. To avoid the conflict of interest between insurers and customers, Lemonade takes a flat fee calculated as a percentage of each premium. That fee pays for salaries, technology, and other costs of running the business. At the end of the year, they calculate how much money they have left after paying out expenses and claims. Whatever is left, they donate to nonprofits chosen by the Lemonade community through the Lemonade Giveback program. (Note: the Giveback program doesn’t apply to life insurance.)

This way, Lemonade doesn’t profit from unclaimed premiums. And customers know that if they file fraudulent claims, it is the charities that get less money in the end.

In 2020, the Lemonade Giveback program donated $1.2 million to over 34 charity partners.

What types of insurance does Lemonade offer?

Lemonade is a fully licensed and regulated insurance company, which means that they underwrite, price, and sell policies, as well as handle and pay claims.

Lemonade offers the following types of insurance.

Lemonade renters insurance

Renters insurance covers:

  • Damage or theft of personal belongings from things like fire, vandalism, and theft (for up to $10,000 in total for the base policy)
  • Temporary living expenses if your home becomes unlivable

It also protects you against liability claims for damages you accidentally cause to others (for up to $100,000 for the base policy). You can add extra coverage for things like jewelry and fine art, water damage, and landlord property damage.

Policies start at $5 / month.

Lemonade homeowners insurance

The homeowners policy covers your home for damages caused by events like wildfires, crime, and extreme weather.

If your home becomes unlivable, Lemonade will cover alternative living expenses. In addition, you are protected against liability claims for damages you accidentally cause to others.

With extra coverage, you can get no-deductible protection, protection against accidental loss, and extra jewelry coverage.

Policies start at $25 / month.

Lemonade term life insurance

Lemonade offers term life insurance for 10, 15, 20, 25, and 30 years. (Term life insurance differs from whole life insurance, which covers your entire life. Whole life insurance is much more expensive.) You can get coverage for up to $1.5 million.

Unlike other insurers, which require a medical exam, with Lemonade, you can apply online, answer a medical questionnaire, and get your application result in minutes.

This policy targets healthy people between the ages of 18 and 60.

Prices start at $9 / month.

Lemonade pet health insurance

Lemonade offers pet health insurance covering diagnostics, emergency care, surgeries, medication, and much more. You can buy an optional wellness package covering wellness exams, vaccines, medical advice, and testing.

Policies start at $10 / month.

Lemonade auto insurance is coming soon.

The Lemonade app is super convenient and easy to use. Claim filing is handled entirely through the app too. Lemonade uses artificial intelligence to review and approve claims (humans serve as backup.)

What else can you do if you don’t want your insurer to support fossil fuels?

Lemonade may not be the right option for you. It is not available in every state, nor does it offer every type of insurance.

Besides, Lemonade is a small company, so it can’t make a material impact on its own.

Insure Our Future, a campaign holding the insurance industry accountable for its role in the climate crisis, suggests other steps you can take:

  • Try to get your city to pass a resolution calling on insurers to stop financing and underwriting fossil fuels. (For example, San Francisco has urged insurers doing business with the city to ditch fossil fuels)
  • Join one of the Insure our Future campaigns to influence major insurers

Insurance companies support the fossil fuel industry by underwriting new oil and gas exploration projects and investing in fossil fuel companies. If you are a consumer of insurance, you have only one fossil free option, Lemonade. But you can also join a campaign to get your current insurer to stop supporting fossil fuels.

🔔 Interested in fossil free bank accounts? Check out our guide to socially responsible banks.

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