Auto Insurance Rate Hikes Slow to 7.5% in 2025

For the seventh consecutive year, auto insurance rates are rising—but there's a silver lining. After steep hikes of 16.5% in 2024 and 12% in 2023, the average rate increase for 2025 is projected to slow to 7.5%. Even with this deceleration, however, premiums are set to hit an all-time high, with the average cost of full coverage expected to reach US$2,101 per year.

According to The State of Auto Insurance in 2025 report by ValuePenguin.com, a LendingTree company, these rate changes reflect broader market trends while highlighting ongoing consumer challenges.

Key trends in 2025 auto insurance rates

1. Biggest rate hikes by state and provider

Drivers in New Jersey, Washington and California are bracing for the sharpest increases, with premiums expected to rise over 15%. Insurers like American Family, Allstate and Liberty Mutual charge the most significant rate hikes.

2. Costliest states for auto insurance

Nevada and Florida are overtaking Michigan as the most expensive states for auto coverage, with premiums soaring to US$3,216 and US$3,264 per year, respectively.

3. Traffic violations bring steeper penalties

Drivers with traffic violations face significant financial consequences. Premiums for violators aim to increase by an average of 53%, with North Carolina seeing the most dramatic spike—146% for unsafe driving behaviours.

4. EV insurance costs are dropping

While insuring EVs is becoming more affordable, it still costs 23% more to insure a new EV than a gasoline-powered vehicle. Legacy automakers like Ford and Volkswagen are offering more economical insurance options for their EVs, unlike EV-only manufacturers such as Tesla and Rivian, whose models remain among the priciest to insure.

"While insurers are scaling back rate hikes, the upward trend in premiums remains a burden for many Americans," says Divya Sangameshwar, insurance expert at ValuePenguin.com. She notes that the discrepancy between announced rate hikes and actual costs—19% more in 2024 versus the previous year—can often be attributed to driver-specific factors such as traffic tickets, new car purchases, or changes in credit scores.

Looking ahead, Divya warns that proposed tariffs on imported goods could disrupt the current trajectory. "Sixty per cent of replacement car parts are imported. Higher costs for these parts could push repair expenses—and consequently insurance premiums—higher in 2026 and beyond," she explains.

Strategies to save on auto insurance in 2025

1. Compare quotes regularly

Shopping around can yield substantial savings, with some drivers saving up to US$2,436 annually. Experts recommend comparing at least five insurers during renewal periods, particularly if you have incidents that could raise your rates.

2. Leverage discounts

Insurance providers offer various discounts, such as:

• Bundling policies: Save up to 18% by combining home and auto insurance.
• Low mileage: Reductions of up to 20% for drivers with minimal annual mileage.
• Defensive driving: Discounts between 10-15% for completing certified courses.

3. Adjust your coverage

Switching to liability-only insurance can reduce costs by 153%, but it comes with limited protection. Raising deductibles or eliminating optional coverage like roadside assistance can help lower premiums.

4. Boost your credit score

Drivers with poor credit pay up to 88% more for insurance. Improving credit not only reduces premiums but eases affordability challenges.

Though 2025 offers some relief for American drivers, affordability remains a challenge as rates continue to climb. To navigate these changes, drivers must remain proactive—exploring discounts, comparing quotes and optimising their coverage.

Resources like ValuePenguin.com remain essential for empowering consumers to make smarter financial decisions as the market evolves.

Methodology:  Data is derived from RateWatch by S&P Global and analysis by Quadrant Information Services, with comprehensive comparisons conducted across all US ZIP codes.

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