However, plans to impose tariffs on imported goods could speed up rates again with 60% of replacement car parts coming from countries like China
Charlotte, N.C.—Relief may be in sight for American drivers as auto insurers pump the brakes on car insurance rate increases for 2025. While premiums are rising for the 7th straight year, on average, drivers should expect to see smaller increases in comparison to last year’s reported 16.5% rate increase.
Despite a slowdown in rate increases, the average cost of auto insurance for 2025 is expected to reach a record high of $2,101/year, according to The State of Auto Insurance in 2025 report published by ValuePenguin.com, a LendingTree company.
2025 Auto Insurance Rate Predictions:
- Auto insurers will raise premiums by an average of 7.5% in 2025—with the biggest rate hikes expected from American Family, All State and Liberty Mutual. Drivers in New Jersey, Washington and California will see their auto insurance premiums rise by over 15% in 2025—the biggest jump in the country.
- The average cost of full coverage car insurance in 2025 will exceed the $2,000 mark to touch $2,101/ year. Nevada ($3,216/year) and Florida ($3,264/year) will overtake Michigan ($3,156/year) to become the most expensive state for auto insurance in 2025.
- Drivers with traffic violations will see their premiums jump 53% on average in 2025, with drivers in North Carolina facing the stiffest financial penalties—an increase of 146% for traffic violations and dangerous driving.
- Insuring electric vehicles is getting cheaper in 2025, but insurance for new EVs will still be 23% higher than new gasoline-powered cars. However, insurance premiums for electric cars made by legacy manufacturers like Ford and Volkswagen are 25% less expensive than insurance premiums for cars manufactured by EV-only companies in 2025—with Rivian’s RV-1, and Tesla’s Cybertruck emerging as the most expensive cars to insure.
In 2024, many drivers reported that their auto insurance rates rose significantly more than the rate hikes announced by auto insurers, says Divya Sangameshwar, an insurance expert at ValuePenguin.com.
She adds, “Insurers raised rates by an average of 16.5% in 2024, but an analysis by the Bureau of Labor Statistics showed that Americans were paying 19% more for auto insurance on average vs the prior year. The discrepancy is likely due to driver-led factors like new car purchases, traffic tickets, changing credit scores, or changes in coverage. Although rates aren’t expected to increase as steeply in 2025 compared to 2024, rates are still trending upward, and as a result, auto insurance payments will still be a financial strain for some in the new year.”
Will rate hikes continue to slow down in 2026 and beyond? According to Sangameshwar, “If things continue the way they are right now — yes. However, if President-elect Donald Trump goes forward with his plan to impose tariffs on imported goods, insurance rate hikes could speed up again.
“In fact, 60% of replacement car parts are imported from other countries like China. Higher costs for parts could mean higher repair prices and more expensive claims, which will result in a bigger rate hike in 2026 and beyond.”
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