There is no shortage of costs when it comes to car ownership. But even if you’ve managed to lower your monthly payments and stay on top of important maintenance to avoid a catastrophic breakdown, the one unavoidable ongoing cost is car insurance. Of course, balancing these costs within your budget can be difficult even in the most stable of times. But with significant tariffs looming, experts are now warning that car insurance rates could be one of the many expenses that will spike in the coming months—with some states seeing jumps of up to 10 percent.
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Car prices are about to spike.
Despite hopes that continued decreases in inflation seen over the past four years might bring some relief to consumers, broad-sweeping tariffs proposed by President Donald Trump have begun to sow doubts. Among the surcharges is a 25 percent tariff on all auto imports, including a new set that came into effect on April 10 that could drive car prices up by as much as $5,000 to $15,000, MarketWatch reports.
Even as the administration wavers on decisions in hopes of forcing other nations into negotiations, there could be more immediate effects you might experience the next time you walk onto a lot.
"Now, tariffs will either be pushing up prices, or in the case of brands that are trying to absorb the cost of the tariffs temporarily, like BMW, consumers are likely to feel even more pressure to buy quickly," Jim Patterson, managing editor of The Kiplinger Letter, recently said. "So we'll see some combination of higher prices and more urgency to buy."
These changes could impact car insurance rates.
Anyone who owns a vehicle has likely felt the cost of insuring their vehicles creeping up this decade. Rates have increased every year since 2020, jumping from an average of $2,019 in 2023 to $2,313 in 2024 alone, Consumer Affairs reports. Now, that rate is expected to increase to $2,435 per vehicle this year.
The sudden rise is due to higher car prices and increased maintenance costs. More expensive replacement parts will make repairs more costly, forcing insurance companies to increase their rates to cover the difference, The Kiplinger Letter reports.
“All tariffs are a tax, and they are inflationary,” Gerry Glombicki, senior director at credit rating agency Fitch Ratings, told MarketWatch. “Those costs [are] borne by insurance companies, [and] they are going to seek to pass them on to the insured.”
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Some states are expected to see worse increases than others.
While this might seem like devastating news outright, analysis shows that this year’s forecasted rate increase will still likely be lower than the considerable 22 percent jump seen between 2023 and 2024, according to data from Insurify. However, the expected jump might be worse, depending on where you live.
The latest projections find that more than a dozen states will see an insurance rate spike higher than the national 5 percent average in the coming months. The hardest hit of the group are states like Delaware, which could see a seven percent increase on annual full coverage to an average of $3,308 by the end of 2025, per Insurify.
Nevada and Georgia are next on the list with an eight percent increase anticipated, leading to an annual average rate of $3,214 and $3,052, respectively. However, it’s New York and Florida that will see the most drastic increases as they’re expected to jump 10 percent before 2026, totaling averages of $4,183 and $3,484, respectively.
How can you avoid paying more for insurance?
Getting around the increased costs might not be as easy as you might think. Even though tariffs affect imported goods, driving a domestic vehicle doesn’t provide full protection, as tariffs on components that are sourced from abroad will still create a bit of a spike. And since insurance rates are set as part of a pool of risks, you’ll still end up paying more per year in the end.
"No matter what kind of car you have, there will be some impact," Robert Passmore, department vice president at the American Property Casualty Insurance Association, told MarketWatch.
However, there are still some limited options. According to The Kiplinger Letter, the upcoming increase offers plenty of incentive to revisit your plan and look for a more competitive one before any changes. This is especially true if your policy is set to expire soon or if you’re planning on buying a new vehicle before the new tariffs.
