Insurify Predicts Car Insurance Costs to Rise Up to 7%

Insurify projects the national average cost of full-coverage car insurance will increase 4% by year’s end from $2,313 to $2,402 and up to 7% if prolonged tariffs lead to significant insurer losses. 

Two motivating factors behind increases are tariffs and extreme weather, according to the Insurify’s latest report. Since April 1, inflation increased and several rounds of tariffs increased the cost of repairs. For insurers, that means the same volume of claims now costs more money to cover. The report said car insurance companies could raise premiums to align their rates with this additional financial risk. 

Natural disasters affect significant swaths of the country. Los Angeles County fires in January destroyed as many as 6,300 vehicles, according to estimates. In 2024, Florida hurricanes led to more than 100,000 auto insurance claims. Hail, prevalent in the Midwest, accounts for about 12% of comprehensive car insurance claims.

The Tariff Question

Insurify analysts said tariffs could prove less burdensome than expected, claim volume could fall, and regulators could push back on rate increases, resulting in more modest pricing. Some insurers are already easing rate hikes and lowering premiums, but premiums could also rise higher than expected if the U.S. implements new tariffs. 

Without tariffs affecting rates further, Insurify analysis suggests rates would rise about 4% by the end of 2025, based on systemic factors such as inflation and how much money insurers are paying out in claims. If insurers still need to account for tariffs in rate setting, Insurify projects that the increase could rise to 7% as insurers covering repair claims pay more to replace foreign-sourced car parts.

The White House has imposed 25% tariffs on foreign automobiles and auto parts, with certain exemptions, including carve-outs for vehicle content from Canada and Mexico.5 In late July and early August, the administration announced agreements with Japan, South Korean, and the EU to lower the tariff rate on cars and car parts sent to the U.S. from 25% to 15%. Japan is the fourth-largest exporter of auto parts to the U.S., South Korea is the fifth, and Germany is the sixth. 

If tariff policies continue to soften, insurers will have one less cost threatening their bottom lines, potentially reducing the likelihood of rate hikes. 

Estimating if and when tariffs could start to raise car insurance rates is complicated. Some insurers had already adjusted their premiums to account for the higher costs and are now planning to lower them, despite tariff-related costs.

Experts say it could take months for tariff costs to flow to individual policies. Insurance is heavily regulated, and insurers typically must demonstrate that tariffs have consistently driven up their costs before state regulators allow them to raise rates in response. Insurers, inherently risk-sensitive, are bracing for a hit.

“If we need to raise prices, we will raise prices just like we did in the pandemic because with our margins, we don’t have a lot of room to absorb [the cost],” said Allstate CEO Tom Wilson in an earnings call.

Insurance Cost by State

The top 10 most expensive states for car insurance in 2025 include: 

1. Maryland 
2. New York 
3. Washington, D.C. 
4. Delaware 
5. South Carolina 
6. Rhode Island 
7. Nevada 
8. Michigan 
9. Georgia 
10. Florida 

Full-coverage rates will rise by up to 10% in Florida, New York, Georgia, Nevada, and Delaware in 2025, according to Insurify projections. In the five states where rates are rising fastest, drivers already pay more than the national average of $2,313 for full coverage.

The top 10 least expensive state for car insurance in 2025 include:

1. New Hampshire 
2. Wyoming 
3. North Dakota 
4. North Carolina 
5. Maine 
6. Idaho 
7. Ohio 
8. Iowa 
9. Hawaii 
10. Vermont 

Tips: How Drivers Can Save Money on Car Insurance Premiums 

Drivers can still take steps to keep their car insurance premiums affordable. Drivers should keep in mind that maintaining a safe driving record is a key factor when setting insurance rates. 

At least twice each year, drivers should review their policies to ensure they have adequate coverage. For example, drivers living in flood-prone areas might want to carry comprehensive coverage in addition to liability coverage. Once they know what they need out of their coverage, drivers can use insurance-comparison websites to get quotes from various insurance companies. 

Drivers who want to save on rates without changing insurers can consider raising their deductibles. Insurers will lower premiums for drivers who increase their deductibles because, by doing so, drivers accept more of the risk burden since they’re offering to pay more of the up-front cost in the event of a claim. 

Beyond that, insurers often offer discounts for paying in full at renewal, bundling policies, using paperless communications, or enrolling in telematics programs that track driving behavior. 

View the full report here.