Tariffs On Auto Imports And More Would Raise Car Insurance Rates 280% Faster | Insurify

Sweeping tariffs could add an extra $324 to the average American's car insurance costs by the end of the year. As of April 3, the White House has imposed at least three sets of tariffs that would effectively make covering car insurance claims more expensive for insurance companies. Insurers are likely to offset those higher costs by raising drivers' premiums.

"The consensus is that recent tariffs will raise the price of auto parts and cause insurers to spend more money on repair claims," said Mallory Mooney, director of sales and service at Insurify. "Faced with this cost increase, we expect insurers will have no other option than to pass these losses on to drivers in the form of higher premiums."

The relevant automotive tariffs include:

Canada and Mexico tariffs, which took effect March 41Aluminum and steel tariffs, which took effect March 122Automobile tariffs, which took effect April 3 and will grow to include auto parts no later than May 33

Insurify projects these tariffs would cause average full-coverage car insurance prices to rise to roughly $2,759 by the end of the year, a 19% increase from the end of 2024 ($2,313). That's 280% faster than Insurify's previous 5% projection before the tariff announcements. Without tariffs, the projected cost was $2,435 by the end of 2025, based on factors like inflation and insurer losses.

Tariffs would make car parts more expensive, raising the amount that insurers have to spend on auto repairs. About 75% of the materials in U.S. vehicles come from outside the U.S., according to the White House.4

The administration temporarily exempted cars and auto parts from the first set of Canada and Mexico tariffs.5 If officials extend that exemption, rates would increase to roughly $2,691 by the end of 2025, up 16% from the end of 2024. With the potential extension, rates would climb 220% faster than they would without tariffs, instead of 280% faster.

The White House says the tariffs aim to drive economic growth and address imbalances in global trade. Reciprocal tariffs, announced April 3, do not impact Insurify's projection because the administration exempted cars, auto parts, steel, and aluminum from that round of tariffs.6

The on-again, off-again application of tariffs makes it difficult to predict exactly how much car insurance costs will change. To estimate how these policies could increase the cost of car insurance, Insurify ran projections on three types of tariffs and combined those results to create an overall forecast for the end of 2025.

Key findings

With tariffs, Insurify projects the average driver would pay $2,759 for annual full-coverage car insurance by the end of 2025 — $324 more than they would pay without tariffs. That's a 19% increase in price from the end of 2024 ($2,313).Insurify estimates that tariffs on imports of automobiles and auto parts would raise car insurance rates by 7%, with March tariffs on aluminum and steel adding another 4 percentage points. Tariffs on Canada and Mexico would add 3 percentage points atop a built-in increase of 5 percentage points unrelated to tariffs.With updated tariffs, each state would see car insurance costs rise between 12% and 24% by the end of the year. Before tariffs were announced, Insurify projected only two states, New York and Florida, would see price increases of 10% or more.With tariffs implemented, New York drivers would see full-coverage car insurance costs rise $911 by the end of 2025, $533 more than the cost would have risen without tariffs.Before tariffs, Insurify projected car insurance costs would decline in Hawaii, New Hampshire, and Vermont. With tariffs, those states will see increases of 12% to 13%.

State by state: How tariffs would raise car insurance costs

Insurify projects drivers in each state will pay more for car insurance due to tariffs, ranging from an extra $140 to an extra $568 by the end of the year.

Maryland will remain the most expensive state for car insurance, with an average annual cost of $4,824 for full-coverage policies by the end of 2025. That's an increase of $746 from the end of 2024, with the bulk of that increase ($568) attributable to tariffs, according to Insurify projections.

New York will see the highest increase in year-over-year costs, up 24% or $911 from the end of 2024, with $533 of that increase attributable to tariffs.

Insurify previously projected Hawaii, New Hampshire, and Vermont would see small decreases in the average insurance cost over the course of 2025. But with the addition of tariffs, each would see costs rise roughly 12% to 13%.

Why tariffs make car insurance more expensive

A major factor in the price of auto insurance is the cost of repairs, which can go up or down depending on the prices of parts and labor. Because 75% of U.S. car content isn't domestically sourced, tariffs would apply to that content, raising the cost of auto parts.

As a result of higher part costs, insurers will pay more for repair claims and eventually pass those costs on to consumers through higher insurance premiums.

Of the three sets of tariffs that Insurify analyzed, the set announced March 26 — tariffs on autos and auto imports — would have the greatest effect since it applies to roughly three-quarters of vehicle content.

Tariffs on aluminum and steel would also raise the average cost of car insurance since 63% of the average vehicle's weight comes from steel and aluminum.7

Tariffs on Canada and Mexico would further raise prices since roughly one-third of auto parts in U.S. vehicles are imported from those countries. This tariff temporarily exempted auto imports.8 If the administration reimposes that exemption, that would lower Insurify's projected annual cost of insurance from $2,759 to $2,691 by the end of 2025.

Reporting indicates that tariffs can stack on top of one another, meaning that in the absence of exemptions, steel, aluminum, and auto parts imported from Canada or Mexico would be tariffed at 50%, raising costs higher.9

Tariffs are likely to affect every automaker, particularly those whose models are made entirely of non-U.S. materials and undergo final assembly overseas. These include Toyota, Volvo, and BMW, among others. Even U.S. automakers, including the "Big Three" of Ford, General Motors, and Stellantis, have multiple models that undergo final assembly outside the U.S.10

Car insurance costs were already climbing heading into 2025

The cost of car insurance surged 42% — nearly $700 — from early 2023 to early 2025, as Americans drove more often after the pandemic. More workers returned to commuting, creating more traffic, which led to more accidents and more payouts for insurers.

Insurify originally projected drivers would see a relatively small price increase of 5% in 2025, with insurers having recovered from previous losses. Tariffs, however, would cause them to pay more money for routine repair claims since a high percentage of the typical vehicle in the U.S. is sourced from foreign parts that would be subject to tariffs.

What drivers should know about tariffs

Drivers are unlikely to see tariff-driven rate increases affect their costs until the end of the year at the earliest because raising rates is a slow-moving process. Insurers would feel the costs before drivers, as they would have to pay more for claims to account for tariff-driven increases in auto part costs.

If tariffs cause significant, sustained price increases for insurers, those insurers would then need to prove to regulators that their losses have outpaced what they make in premiums.

Insurers deal with regulators on a state-by-state basis. If they saw higher losses due to repair costs in a given state, they would then compile that information and submit it to state regulators to justify a rate hike. State regulators wouldn't approve a rate hike based solely on the anticipation that tariffs would increase rates. But they could approve increases after insurers prove higher repair costs make rate increases necessary.

Price increases would show up when drivers renew their policies or switch to a new insurer rather than in the middle of a six-month coverage period.

Americans have a few options for mitigating these tariff-related increases in car insurance premiums. Drivers can start by comparing prices among different insurers to see if they can get a better deal with another company. Another option is raising their deductible, which lowers regular premiums but could leave drivers on the hook to pay more up front in the event of a claim.

Drivers who are happy with their insurer and policy but still want to save on premiums can install telematic devices or applications. These programs monitor and reward safe driving, with some saving drivers up to 30% on annual costs.

Our methodology

The projections in this article assume a 25% tariff on imported automobiles, automobile parts, imported steel and aluminum, and targeted tariffs on Canada and Mexico. Insurify's data scientists then calculated how these tariffs would impact car insurance rates by factoring in the proportion of vehicle content that arrives in the U.S. from outside the country and the portion of the average vehicle made from steel and aluminum.

From there, Insurify analyzed the share of typical vehicle repair costs represented by parts and the proportion of a standard full-coverage car insurance policy that covers damages to one's own or another's vehicle. Insurify calculated tariffs' effects on auto insurance prices on a national level and then equally distributed across states.

To calculate baseline prices, Insurify's data scientists examined more than 97 million rates in the company's proprietary database, quoted via integrations with over 120 insurance partners. Driver applications originate from all 50 states and Washington, D.C., and include information on the exact coverage specifications of each driver's quoted policies. Insurify excluded Alaska data due to lower quoting volume.

The premiums in this report reflect the median insurance cost for drivers between the ages of 20 and 70 with clean driving records and average or better credit, unless otherwise noted. Yearly prices in this report are two-year rolling medians to manage extreme market volatility over the past few years.

For media inquiries or questions about our study, please contact the author here.

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