American drivers can expect relief from auto insurance costs as insurers are expected to lower rate increases this year, ValuePenguin, a personal finance website, said in a report.
According to its “The State of Auto Insurance in 2025” report, premiums will continue to increase at an average rate of 7.5% – slower than last year’s rate increase of 16.5%. The biggest rate hikes this year are expected to come from American Family, Allstate and Liberty Mutual.
Meanwhile, drivers in the states of New Jersey, Washington and California are expected to see their insurance premiums increase by over 15% this year, still lower than last year’s increase.
Despite the slowdown in rate hikes, the average cost of full car insurance coverage is expected to reach a record high of $2,101 per year. The states of Nevada and Florida are set to overtake Michigan as the most expensive state for auto insurance in 2025, with annual full insurance costs expected to be at $3,216 and $3,264, respectively.
Drivers with traffic violations are also expected to see an increase in premiums by an average of 53%. Drivers in North Carolina with traffic violations or dangerous driving records can expect an increase of as high as 145% on their premiums this year.
Meanwhile, insuring new EVs will still be 23% higher than insuring new gasoline-powered cars but generally, insuring electric vehicles will be cheaper this year.
Insurance premiums for EVs manufactured by manufacturers of gasoline-powered cars, like Ford and Volkswagen, are 25% less expensive than premiums for cars manufactured by EV-only companies. Rivian’s RV-1 and Tesla’s Cybertruck are expected to be the most expensive cars to insure this year on this front.
Divya Sangameshwar, an insurance expert at ValuePenguin, said auto insurance payments remain a financial strain for some Americans as rates continue to increase despite the slowdown.
Looking ahead into 2026 and beyond, Sangameshwar said that rates may continue to increase if circumstances stay the same but that could be exacerbated by Trump’s economic plans.
“If President-elect Donald Trump goes forward with his plan to impose tariffs on imported goods, insurance rate hikes could speed up again,” Sangameshwar said. “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."
