How Does Lemonade Car Price Policies?

And what the heck is an OBD port?

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If you own a car, but don’t use it that much, why get stuck paying for the miles you don’t drive? At Lemonade Car, your monthly mileage helps determine your premium—so the less you drive, the more you’ll save. 

In this article, we’ll get into the nitty-gritty of how our dynamic pay per mile pricing works. If you’d rather get a quick idea of how much you’d actually pay for your own policy, click the button below to get a quote!

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  • Each month you’ll pay a different price: The number of miles you drive multiplied by your per-mile price, plus a monthly base price (which stays the same every month).
  • A lot of factors help us determine a fair base price and per mile price for each car on your policy—like the make, model, and model year of each car, the coverages you include for each car, and the drivers you add.
  • We’ll send you a smart device that you’ll need to plug into your car’s OBD-II port, which lets us track your mileage with precision.

What factors determine car insurance costs?

There are lots of variables that factor into the cost of car insurance, including: 

  • Your insurer
  • The state you live in
  • Your driving history and driving habits
  • Your car’s make and model year
  • The additional drivers you include
  • The specific coverages, limits, and deductible you include on your policy

Want to learn more about the different factors that impact the cost of car insurance? Read on here.

At Lemonade Car, all of these factors help determine your pricing, but your price will fluctuate from month-to-month based on the number of miles you actually drive.

Why does my policy price vary from month-to-month?

Because of the importance of mileage, you’ll pay a different price for Lemonade Car insurance every month—unless you manage to drive the exact same amount each month, which would be a bit weird. 

We use a simple formula to calculate your monthly price—which includes some moving parts, and some that stay in park.

And just a quick FYI: Making changes to your policy mid-term—like adding a car or driver, or updating your coverages—will impact both your base price and per mile price.

Per mile price

Your per mile price will likely be a small number—mere cents, even. And this price will stay the same during your policy’s six month term. Each month, we multiply your per mile price by the number of miles you drive that month. So if you don’t drive—or drive less than usual—you’ll pay less.

Have more than one car on your policy? Depending on the details of the cars you cover—including the make and model year—you’ll pay a different per mile price for each car. 

Base price

Your policy’s base price is a flat monthly fee. That means that it won’t change during your policy’s six-month term, or be impacted by how many miles you drive each month.

So if you’re on vacation and your car is in a parking garage for all of June, you won’t pay more than your base price.  

Down payment

It’s important to note: When you buy your first Lemonade Car policy, your first month’s price will probably include a one-time down payment. We’ll subtract a portion of your down payment from your price until you’re fully reimbursed—which will be by the end of your first six-month term.   

Let’s take a look at an example…

Olivia just bought her first Lemonade Car policy to cover her Subaru Forester, nicknamed “Herbert.” She’s a safe driver with a low-mileage lifestyle. 

Her base price is $31 a month, plus 7¢ per mile, with a one-time down payment of $40. When Olivia makes her first monthly payment—which only includes her base price and down payment—she pays $71. 

During Olivia’s first month with Lemonade Car, she drives Herbert a total of 213 miles, so her second month’s price comes out to $45.91: a calculation of the 213 miles she drove, multiplied by 7¢ per mile, plus her $31 base price. After subtracting part of the down payment, the actual payment is for $38.

Of course, these numbers are hypotheticals. Your own price will vary depending on the state you live in, your driving history and driving habits, and your car’s make and model year—along with other factors, like the specific coverages you include on your policy. Also, the one-time down payment will only impact your insurance costs during your first policy term.

How do you know my monthly mileage?

Since your mileage helps determine how much you pay for car insurance each month, we need to track your mileage with precision. (So we do!)

When you buy a Lemonade Car policy, we’ll send you a device for each car on your policy. You’ll need to plug the device into your car’s OBD-II port

The device lets us track your mileage down to the foot, which helps us price your policy fairly. Learn more about how the device works here

How will my price be impacted if I take a long trip?

You determine how much you save based on how much you drive. So if you find yourself driving a lot every month, a Lemonade Car policy might not be the best fit for you.

But let’s say you’re generally a low-mileage driver who likes to take the occasional longer drive or road trip. Lemonade Car has buffers to protect your low-mileage track record.

Your policy has a daily limit——the maximum amount of miles we’ll charge you for in a single day. This daily limit varies by state, and is detailed in your policy. In Oregon, for example, any mile you drive over 250 miles per day won’t impact your monthly price. 

How can I lower my price?

You probably already guessed it, but the best way to keep your Lemonade car insurance costs low is by driving less—and we have lots of tips and tricks to do that. 

Think of it this way: Every time you choose to take public transportation, or bike to work, you’re saving money on your car insurance. But there are also so many other ways to save on your premium. Let’s take a spin through a few.


We offer trunk loads of opportunities to lower your premium—including bundling Lemonade policies, covering more than one car, and savings when you plan ahead with a future start date.

Safe driving habits

The same device that lets us track your mileage with precision also helps us detect good driving habits—like opting for well-maintained roads, and driving during daylight hours without heavy traffic—which could potentially lead to lower insurance rates at renewals for safe drivers. 

(That also means that dangerous driving behaviors—like hard braking, or speeding—could negatively impact your premium.) 

Customize your coverages

We offer customizable insurance at your fingertips, all on the Lemonade app. 

That way you can see how different coverages, limits, and deductibles impact the amount of money you’ll spend on premiums. Because you deserve to find the right balance between coverage that gives you confidence on the road, while also being budget-friendly.

Only pay for the miles you drive

When you determine how much you save on car insurance each month based on how much you drive, and also have the ability to manage your policies and lower your premiums in the palm of your hand, you might just find yourself belting out “I’ve got the power!” (And we won’t judge your singing talents when you do, pinky promise.) 

Ready to take control and save? Start your quote with Lemonade Car by clicking below.

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A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them.represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states.


Please note: Lemonade articles and other editorial content are meant for educational purposes only, and should not be relied upon instead of professional legal, insurance or financial advice. The content of these educational articles does not alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. While we regularly review previously published content to ensure it is accurate and up-to-date, there may be instances in which legal conditions or policy details have changed since publication. Any hypothetical examples used in Lemonade editorial content are purely expositional. Hypothetical examples do not alter or bind Lemonade to any application of your insurance policy to the particular facts and circumstances of any actual claim.