Your Car Insurance Could Be Getting More Expensive in 2025: Here’s Why
Written by
Gabrielle Olya
Edited by
Jordan Rosenfeld
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Auto insurance rates have been on the rise. The average cost of car insurance rose more than 25% in 2024, with some states seeing average premium increases of 40% or more, CNBC reported.
Unfortunately for drivers, car insurance rates will likely continue to rise in 2025. Here are some of the possible reasons behind the increases, plus, what you can do about it.
The Cost To Repair and Replace Cars Is Increasing
When the cost to repair and replace cars increases, policymakers raise their rates to recoup these costs. Additionally, more people are making claims due to climate-related incidents, which also drives up insurance costs.
“According to recent data from iDriveSafely and Aceable, 69% of drivers have experienced higher auto insurance premiums,” said Laura Adams, senior analyst with Aceable. “There are several reasons why rates rose, including record inflation, higher vehicle repair costs and more frequent and costly natural disasters. When the number and cost of claims by policyholders increases, insurers must raise premiums to remain profitable.”
Adams predicts these trends will continue into 2025.
“Auto rates for 2025 continue rising due to more claims from car crashes and damage to vehicles from natural disasters, like wind storms, floods, fires and hail storms,” she said. “Higher accident rates can be attributed to congested highways in larger cities and drivers being distracted by in-car technology and smartphones. Distracted driving is the leading cause of car crashes.
“Once a claim is made, the cost of parts and labor to repair a damaged vehicle has risen due to inflation and labor shortages,” Adams continued. “When policyholders make more auto claims that cost their insurers more, the carriers must charge higher premiums to ensure their profitability.”
Some Drivers Are More Likely To See Insurance Premium Increases
The insurance rate you receive depends on a number of factors that are unique to you, so some drivers are more likely to see insurance cost increases in 2025 than others.
“A driver’s location, vehicle make and model, driving history and coverages are primary factors that influence auto rates,” Adams said. “For instance, insurance costs in Florida are 48% higher than the national average. Drivers who live in states with more frequent and expensive natural disasters are likely to see the highest premium increases in 2025.
“Also, in most states, a driver’s age and gender are a significant rating factor,” Adams continued. “Therefore, young drivers or families insuring drivers under age 26 pay some of the highest auto insurance rates because they’re statistically more likely to get into an accident and make a claim.”
What You Can Do To Lower Your Insurance Costs
Some insurance premium hikes are out of your control, but there may be levers you can pull to decrease what you pay for car insurance.
“One way to reduce auto insurance premiums is bundling coverage with other policies, such as home or renter’s insurance,” Adams said. “Ask about various discounts you may be eligible for, such as having a teenage driver in your household who is a good student, driving fewer miles annually and completing a defensive driving course.
“Nearly half (43%) of those who took defensive driving said they paid less for car insurance, and 62% said they felt safer on the roads,” she continued. “That’s valuable because staying accident-free is critical for preventing your auto insurance rate from rising needlessly.”
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