After an average rate increase of 16.5 percent in 2024 and 12 percent in 2023, insurers are raising rates 7.5 percent on average in 2025, according to LendingTree.

A new report by by ValuePenguin.com, a LendingTree company, indicates relief is in sight for auto owners despite rising insurance premiums for the 7th straight year, drivers can expect to see smaller increases in premiums compared to recent years.

Despite the slowdown, the average cost of auto insurance for 2025 is expected to reach a record high of $2,101 per year,the “State of Auto Insurance in 2025” report found.

The report outlines some predictions.

The biggest rate hikes are to come from expected from American Family, Allstate and Liberty Mutual.

Drivers in New Jersey, Washington and California will see their auto insurance premiums rise by over 15 percent in 2025 – the biggest jump in the country, according to the report.

The average cost of full coverage car insurance in 2025 will exceed the $2000 mark to touch $2,101/ year. Nevada ($3216/year) and Florida ($3264/year) will overtake Michigan ($3156/year) to become the most expensive state for auto insurance in 2025.

Drivers with traffic violations will see their premiums jump 53 percent on average in 2025, with drivers in North Carolina facing the stiffest financial penalties – an increase of 146 percent for traffic violations and dangerous driving.

Insuring electric vehicles is getting cheaper in 2025, but insurance for new EVs will still be 23 percent higher than new gasoline-powered cars.

Insurance premiums for electric cars made by legacy manufacturers like Ford and Volkswagen are 25 percent less expensive than insurance premiums for cars manufactured by EV-only companies in 2025 – with Rivian’s RV-1, and Tesla’s Cybertruck emerging as the most expensive cars to insure.

In 2024, many drivers reported that their auto insurance rates rose significantly more than the rate hikes announced by auto insurers, said Divya Sangameshwar, an insurance expert at ValuePenguin.com.

“Insurers raised rates by an average of 16.5 percent in 2024, but an analysis by the Bureau of Labor Statistics showed that Americans were paying 19 percent more for auto insurance on average vs the prior year,” she added. “The discrepancy is likely due to driver-led factors like new car purchases, traffic tickets, changing credit scores, or changes in coverage. Although rates aren’t expected to increase as steeply in 2025 compared to 2024, rates are still trending upward, and as a result, auto insurance payments will still be a financial strain for some in the new year.”

Will rate hikes continue to slow down in 2026 and beyond?

“If things continue the way they are right now – yes. However, 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 percent 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.”