2025 State of Auto Insurance: Rate Increases Are Slowing Down in 2025

PR Newswire · 6d ago

After an average rate increase of 16.5% in 2024 and 12% in 2023, insurers are raising rates 7.5% on average in 2025

CHARLOTTE, N.C., Jan. 7, 2025 /PRNewswire/ -- Relief may be in sight for American drivers as auto insurers pump the breaks 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 $2000 mark to touch $2,101/ year. Nevada ($3216/year) and Florida ($3264/year) will overtake Michigan ($3156/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."

State of Auto Insurance 2025 Report: https://www.valuepenguin.com/state-of-auto-insurance-2025

Tips To Save On Your Auto Insurance in 2025

  1. Compare insurance quotes: With some insurers raising rates more than others — comparison shopping during each policy renewal period will continue to be one of the best ways to save money on auto insurance in 2025. Drivers who shop around could save as much as $2,436/year. Drivers should compare prices from at least five insurers, or more if they have a recent incident that could raise your rates even more.
  2. Research discounts: Insurance companies offer many discounts to help you lower your rates. Bundling home and auto insurance policies reduce prices by 18%, and bundling multiple cars into one policy can offer savings of up to 25%. Insurance companies give you discounts for taking actions that make you less risky to insure. This includes a 10-15% discount for drivers who take a defensive driving course, a 10% discount for safe drivers who've been accident free for over 5 years and a 20% discount for drivers with low mileage use.
  3. Adjust coverage: Liability-only car insurance is 153% cheaper than full coverage car insurance - but it is a risky option due to its limited coverage and should be considered as a last resort. Drivers looking to adjust their coverage can focus on raising their deductibles, and removing optional coverage like roadside assistance, to bring down their car insurance costs.
  4. Improve credit score: Insurers in almost every state use credit history to set rates. Americans with a poor credit score pay as much as 88% more for car insurance and are 19% more likely to have had trouble affording car insurance. Improving your credit score is a great way to bring down auto insurance costs in 2025.

Methodology

Auto insurance rate change data was compiled using RateWatch from S&P Global, which uses annual information from the National Association of Insurance Commissioners (NAIC). Quotes are for a 30-year-old man who drives a 2015 Honda Civic EX with good credit and a clean driving record, unless otherwise noted. Quotes include the largest companies in each state from all available ZIP codes. Rates for popular car models are from every ZIP code in Illinois and based on sales data from Cox Automotive through Q3 2024. All insurance quotes were gathered between October and December 2024.ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only, as individual quotes may differ. Quotes are monthly costs for full coverage unless otherwise stated. Full coverage quotes include collision and comprehensive coverage, plus liability coverage and any others required by law.

About ValuePenguin.com: 

ValuePenguin.com and its parent company, LendingTree®, have a common mission: to empower consumers with tools, information, and resources to help them make smarter, more informed financial decisions. For more information, please visit www.valuepenguin.com, like our Facebook page or follow us on Twitter @ValuePenguin.

Media Contact:

Divya@LendingTreeNews.com

OR

media@valuepenguin.com

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SOURCE LendingTree, Inc.