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Auto Insurance Rates Fell In 2025, But Affordability Gap Between States Is Widening

After two years of punishing increases, car insurance prices finally eased for many U.S. drivers in 2025. But relief has been uneven, and insurers expect the gap between the most and least expensive states to widen further in 2026.

The average annual cost of full-coverage auto insurance declined 6% nationwide in 2025, falling to $2,144, according to a new report from Insurify. Rates dropped in 39 states, including eight where premiums fell at least 15%.

The decline marked a sharp reversal from the previous two years, when auto insurance costs surged 46% between 2022 and 2024. Those increases were driven in part by post-pandemic risky driving behavior, inflation, higher repair costs and elevated claims severity.

For insurers, the spike in premiums significantly improved financial performance. With stronger margins, many carriers were able to cut rates in 2025 to retain existing policyholders and attract new customers.

“Insurers’ margins are now high enough to absorb some costs without immediately raising prices,” Insurify said in the report, noting that competitive pressures also played a role in driving prices down.

Drivers appear to be noticing the change. The share of motorists who said their car insurance was unaffordable fell from 38% in May 2025 to 32% in December, according to Insurify survey data.

Still, the nationwide average masks large regional differences, and in many of the most expensive states, premiums continued to climb.

Expensive states see prices rise

Four states and Washington, D.C., saw double-digit percentage increases in average full-coverage premiums in 2025. New Jersey recorded the largest jump, with rates rising 20%, followed by Washington, D.C., at 18%, Rhode Island at 13% and Michigan at 12%.

Washington, D.C., emerged as the most expensive place in the country for car insurance, with an average annual premium of $4,017 — nearly double the national average. High population density, heavy congestion and one of the nation’s highest rates of uninsured drivers have pushed costs higher.

“D.C. lends itself to high car insurance costs on multiple fronts,” said Daniel Lucas, Insurify’s senior carrier partnerships manager. “It’s a highly congested, high-cost-of-living city with dangerous driving habits. Given the financial risks insurers face, there’s little incentive for companies to cut premiums.”

Maryland remained the second most expensive market at $3,601, even after a 9% decline in 2025. Rates surged in late 2024 following a state requirement for enhanced underinsured motorist coverage, then pulled back as fatal crashes declined and insurers adjusted pricing.

Rhode Island climbed to the third-most expensive state, with average premiums rising 41% since early 2024. The state’s small size, high population density and exposure to flooding have contributed to volatility in pricing.

Michigan and New York, both no-fault insurance states, also ranked among the most expensive markets. Insurify said drivers in no-fault states pay about 13% more on average than those in traditional fault-based systems, partly due to higher claims costs.

Cheaper states get cheaper

At the other end of the spectrum, states that already had relatively low insurance costs generally saw the biggest declines.

Wyoming posted the steepest drop, with average full-coverage premiums falling 30% in 2025 to $1,052. Iowa followed with a 25% decline, and Arkansas saw prices fall 23%.

Insurify attributed the reductions in these states to lower population density, fewer accidents, declining vehicle theft rates and lower proportions of uninsured drivers. In Arkansas, for example, fatal crashes fell 12% year over year through the first nine months of 2025, while vehicle theft dropped 24% in the first half of the year.

Utah and Idaho also recorded double-digit declines. Utah benefited from what analysts describe as one of the most competitive auto insurance markets in the country, while Idaho’s sparse population and low uninsured motorist rate helped keep premiums down.

Overall, the 10 cheapest states for car insurance saw average rates fall 12% in 2025, while the 10 most expensive states saw rates rise 2%, according to Insurify. The result is a growing affordability gap between regions.

Modest increase expected in 2026

Looking ahead, Insurify projects that the average annual cost of full-coverage auto insurance will rise about 1% in 2026, bringing the national average to roughly $2,158.

Prices are expected to increase in 35 states and decline in 15. Projected changes range from a 1.8% increase in Georgia to a 1.4% decrease in Nebraska.

Economic conditions could play a key role in determining whether rates remain stable.

“Insurers often invest unused funds, and when stock market returns are high, it gives insurers more latitude to absorb costs and cut rates,” Lucas said. “If the stock market dips, insurers may be more reliant on revenue from premiums, which can lead to higher rates.”

Another wild card is U.S. tariff policy. While higher tariffs on auto parts have not yet fully filtered through to repair costs, Insurify warned that rising claims expenses could push insurers to raise premiums. If carriers pass those costs on to consumers, national rate increases in 2026 could reach 4% instead of the projected 1%.

Vehicle models matter

Insurance costs declined across nearly all popular vehicle models in 2025. Of the 50 most-quoted vehicles in Insurify’s database, 48 saw average premiums fall.

The exceptions were Tesla’s Model S and Model X, which posted increases of 9% and 7%, respectively. Insurify said electric vehicles generally cost more to insure than gas-powered cars, and Teslas tend to be more expensive than the average EV due to higher repair costs and specialized parts.

Among the models with the largest premium declines were the Kia Forte, Volkswagen Tiguan, Chevrolet Tahoe, Subaru Outback and Mazda3, each of which saw average full-coverage costs drop about 11% or more.

Advice for consumers

Despite improving affordability, Insurify cautioned drivers against automatically renewing their current policies.

More than half of drivers surveyed said they stayed with their insurer even though they believed they could find a better deal elsewhere. Insurify estimates that consumers who comparison-shop could save up to $1,100 annually.

Other strategies include maintaining a clean driving record, enrolling in telematics programs that reward safe driving, and asking insurers about discounts for safety features, low mileage, bundling and paperless billing.

For drivers planning to buy a vehicle in 2026, Insurify said auto insurance costs should be part of the decision-making process, as premiums can vary widely by make and model.

While many Americans welcomed rate relief in 2025, the report makes clear that geography still plays an outsized role in what drivers pay — and that gap is likely to persist in the year ahead.

The post Auto insurance rates fell in 2025, but affordability gap between states is widening appeared first on Insurance News | InsuranceNewsNet.

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