Auto insurance premiums are set to rise for the seventh consecutive year in 2025, but the pace of increases is slowing. According to ValuePenguin.com's State of Auto Insurance in 2025 report, premiums will increase by an average of 7.5% next year, far below the 16.5% jump drivers faced in 2024.
Despite the moderation, the average cost of full coverage car insurance is projected to hit a record $2,101 annually, further straining American wallets.
Some regions and drivers, however, will bear a disproportionate burden. Drivers in New Jersey, Washington and California will experience the largest increases, with premiums in those states expected to rise by over 15%, the report noted.
Meanwhile, Nevada and Florida will surpass Michigan as the most expensive states for auto insurance, with average annual costs of $3,216 and $3,264, respectively.
Higher Costs for Traffic Violations and EVs
Drivers with traffic violations face even steeper hikes. On average, premiums for violators will jump 53%, with North Carolina drivers seeing the highest penalties -- up to 146% more than their base rates.
Insurance for electric vehicles (EVs) is becoming more affordable overall, but premiums for new EVs remain 23% higher than for gasoline-powered vehicles. EVs produced by legacy automakers like Ford and Volkswagen are 25% cheaper to insure than models from EV-only companies such as Rivian and Tesla. Models like the Rivian R1T and Tesla Cybertruck top the list as the costliest to insure.
The Bigger Picture
While 2025’s slower rate increases may offer slight relief, the factors driving premium hikes remain persistent. Divya Sangameshwar, an insurance expert at ValuePenguin.com, explained: “Although rates aren't expected to increase as steeply in 2025 compared to 2024, auto insurance payments will still be a financial strain for some in the new year.”
Sangameshwar also noted potential risks ahead: “If President-elect Donald Trump moves forward with plans to impose tariffs on imported goods, the costs for replacement car parts could rise significantly, leading to higher repair expenses and bigger rate hikes in 2026.”
