The State of Car Insurance in 2025
The cost of car insurance in the United States has never been higher. According to the 2025 National Auto Insurance Report, the average cost of a full‑coverage policy has risen to approximately $2,638 per year. This is an increase of 12% over 2024 and roughly 20% over the average cost five years ago (Bankrate, 2025). Meanwhile, certain states like Maryland have surged well past this mark, averaging roughly $4,060 per year for full coverage, making it the costliest state for car insurance in the nation (Insurify, 2025).
The rise in insurance rates is attributed to higher repair costs, increased medical claim expenses, and rising instances of catastrophic weather events. Inflation across the auto industry has pushed the cost of accident repair parts and labor to unprecedented levels. According to Investopedia (2025), accident claims have risen by roughly 8% due to increased replacement part and technician costs. Meanwhile, electric vehicles, which are gaining market share, cost roughly 23% more to insure due to their higher average repair cost (Forbes Advisor, 2025).
Why Are Premiums So High?
The sharp rise in car insurance prices doesn’t arise from a single source. Instead, it is the result of multiple compounding factors:
- Cost of Medical Care: Medical costs associated with accident claims increased roughly 5–7% across most states over the last year (Investopedia, 2025). Even relatively low-impact crashes can result in expensive medical claims.
- More Expensive Vehicles: Newer vehicles, especially electric and hybrid models, carry complex electronics and costly sensors, making them more expensive to repair and insure.
- Climate and Weather Events: Damage from hurricanes, floods, and hail cost insurers billions. In the first half of 2025 alone, insured losses from weather events increased by roughly 10% (Guardian Service, 2025).
- Legal Costs: The increasing trend of lawsuits and higher average claim amounts have added pressure to insurance costs across the United States (Investopedia, 2025).
- Driver Behavior: The pandemic era reshaped traffic patterns, with higher instances of reckless driving, DUI incidents, and distractions (Forbes Advisor, 2025). These behavioral shifts have impacted insurers’ risk assessments.
The Impact of Location and Vehicle Model
Location and car model can have an outsized effect on insurance costs. In the table below, you can compare average annual insurance costs across popular car models (Bankrate, 2025):
| Model | Annual Cost |
| Tesla Model Y | $3,996 |
| Honda CR‑V | $1,995 |
| Toyota RAV4 | $2,180 |
| Ford F‑Series | $2,238 |
| State | Annual Cost (Full Coverage) |
| Maryland | $4,060 |
| Vermont | $1,103 |
| New York | $3,987 |
| Ohio | $1,384 |
In terms of state averages, differences can be even more significant. According to the 2025 State Insurance Cost Index (Insurify, 2025).
What You Might Be Overspending
Research from the 2025 State of the American Driver Report (J.D. Power, 2025) suggests that as many as 99% of insured drivers could save money by making one or more changes. For example, the average American could save roughly $461 per year by comparing quotes from multiple carriers, regardless of state or demographics.
Moreover, approximately 27% of drivers have stated that their annual premium increased by $100–200 in 2024 alone (Investopedia, 2025). These rising costs, combined with the slow wage growth for many Americans, have made it critical for drivers to review their policies.
How Your Driving Record Impacts Your Insurance Costs
Practicing safe driving habits can reduce your risk of accidents or traffic citations. This can pay off in lower insurance premiums: Drivers with a "clean" driving record that shows no incidents or violations pay an average of $2,153 annually or $179 per month for car insurance. One moving violation brings those premiums to an average of $2,537 per year.
If your driving record includes moving violations or accidents (even fender-benders where you weren't at fault), insurance companies may view you as a higher-risk driver and raise your car insurance premiums to compensate.
The chart below shows how the number and severity of infractions may impact your insurance costs. Incidents include things like traffic accidents or insurance claims; violations include moving violations, such as speeding tickets.
Smart Strategies for Reducing Premiums in 2025
While rising insurance costs might seem like an unavoidable reality, many strategies can help drivers save. Here are actionable ways:
Compare Quotes Annually
Even if you’ve been with the same insurer for a long time, it’s worth comparing quotes every year. According to J.D. Power (2025), roughly half of those who switched carriers saved an average of $461.
Adjust Deductible
Increasing your collision or comprehensive deductible can lower your premium significantly — sometimes by as much as $100–250 per year.
Bundle Policies
Combining auto and homeowners or renters policies can yield multi‑policy discounts. According to the State Auto Insurance Index (Insurify, 2025), these discounts can range from $50–200 per year.
Participate in Telematics Programs
Usage‑based insurance programs that reward safe driving behavior can save up to 20% for low‑risk drivers (Forbes Advisor, 2025).
Maintain a Strong Credit History
In many states, insurance carriers consider credit scores when setting premiums. Improving your credit can save as much as $300 per year in certain markets (Investopedia, 2025).
Drop Unnecessary Coverages
For older vehicles worth less than $4,000, dropping comprehensive or collision coverage can save up to $600 per year (Bankrate, 2025).
Choose a Car Model with Lower Premiums
If you’re in the market for a new car, consider one with lower insurance costs. Models like the Honda CR‑V or Ford F‑Series have lower average premiums compared to Teslas or luxury cars.
Ask About Available Discounts
Inquire about discounts for low mileage, accident‑free records, advanced safety equipment, or defensive driving courses. According to Guardian Service (2025), these can save anywhere from $100–300 per year.
Regulations Helping Lower Costs
Several states have introduced policies to help mitigate rising insurance costs:
- California now restricts insurers from relying heavily on credit scores and ZIP codes when setting rates, making pricing more equitable across demographics.
- New Jersey implemented a cap on annual premium increases, providing a buffer for consumers.
- Michigan introduced optional Personal Injury Protection (PIP) levels, allowing drivers to reduce their rates based on their medical coverage needs.
- Florida’s 2024 reforms targeted attorneys’ fees, reducing premium rates by roughly 10.5% across the state.
- While state policies can help, it is still vital for individual drivers to review their policies and remain active participants in controlling their premium.
Final Thoughts
Rising car insurance rates may seem like an unstoppable trend, but understanding the root causes and available mitigation strategies gives you the power to save. The average American can save hundreds every year by making a handful of strategic changes — from choosing the right coverage and car, to exploring discounts and comparing quotes. The cost of doing nothing is too high.
In 2025 and beyond, vigilant, informed drivers have a distinct advantage. The insurance market may evolve, but the consumer’s right to save doesn’t have to be lost.
References
Bankrate. (2025, February 10). National average cost of car insurance in the United States reaches $2,638, up 12% from 2024. https://www.bankrate.com/f/102997/x/2bcaee837e/2025-true-cost-of-auto-insurance-report-final.pdf
CoinLaw. (2025, May). US auto insurance industry statistics 2025: Premiums, costs, etc. https://coinlaw.io/us-auto-insurance-industry-statistics/
FinanceBuzz. (2025, April). 2025 auto insurance statistics and consumer report. https://financebuzz.com/auto-insurance-statistics
Forbes Advisor. (2025, January). Car insurance facts and statistics 2025. https://www.forbes.com/advisor/car-insurance/car-insurance-facts-and-statistics/