Why car insurance costs have soared (and what drivers are doing about it)

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Car insurance

How has the price changed since before the pandemic?

On average, premiums are up 55% since February 2020, according to the Bureau of Labor Statistics. (Almost all of that increase came between 2022 and 2024.)

Why has the price gone up?

Cars are more expensive; parts and repairs are more expensive; medical bills following auto accidents are more expensive. Modern cars are packed with pricey electronics, pushing up the cost of fixing even minor fender-benders, while empty streets during the pandemic encouraged speeding and led to more severe (and more expensive) crashes.

All those things cost insurers money.

Patty Kuderer is the insurance commissioner for the state of Washington; when insurance companies want to raise premiums, they need to ask her office for approval. "The claims paid really drive the cost of the premiums," she says.

And when companies bring her proof of the higher amounts they're paying out — like they have in recent years — she's required by law to approve those increases.

But those price hikes may finally be about to top out.

"The good news is that, largely, the industry is caught up on premiums, and we're now starting to see companies reduce costs and compete for business," says Bob Passmore, a vice president at the American Property Casualty Insurance Association, the trade group that represents insurers. Insurance companies had strong profits last year, and price hikes have stabilized.

"We may have seen the worst of it," he says.

With one caveat: There's a six to 12 month delay between when the insurance companies get hit by higher costs and when they're passed along to consumers, as companies assess their actual costs and get approval from regulators like Kuderer. Price hikes in the near term — caused by tariffs or other factors — could push up premiums again in the future.

What are people doing about it?

Shopping around, for one thing: Data analytics company LexisNexis reports that drivers are shopping around for policies at the highest rate since 2020, when the company started tracking.

Another thing they're doing: suffering. In a recent survey by LendingTree, more than 58% of drivers said their car insurance is a financial burden; more than half said they have cut back on other expenses to be able to afford their premium; more than a third said they avoid filing claims to keep their premium low. And more than a third of respondents said that they have at some point driven without car insurance — which is illegal in every state except New Hampshire.

The percentage of drivers on the road without insurance rose from 12.4% to 15.4% between 2018 and 2023, according to the Insurance Research Council.

'I just couldn't afford it': Driving uninsured 

Zoe, a pastry chef in Pennsylvania, understands the importance of car insurance better than most. A few years ago, she had only the bare minimum insurance on her Toyota when an accident financially devastated her. Without insurance that would replace her undriveable vehicle, she was left car-less, with an hour-long commute. Her savings were entirely wiped out.

When she was able to replace her vehicle, she made sure to get full coverage insurance, at $230 a month. But it was a tight squeeze to cover it, and then her rent went up by $400.

We're only using Zoe's first name because, for a short time after that, she became one of those people driving without insurance. "I fully didn't pay my car insurance bill for about four weeks just because I couldn't afford it," Zoe says. "We have to eat every week. You have to pay the power and the water bill and the rent, and the rent keeps going higher, and milk's $4 a gallon."

Zoe was acutely aware of the risks she was taking if she got in a crash or pulled over. "I slow down at every single intersection, regardless of whether the light was green or not," she recalls with a heavy sigh. "I'm careful at every turn. I get worried."

She ultimately scraped together the funds to get her coverage back. But it costs extra to reinstate coverage after it lapses, one reason among many why insurance advisors strongly advise against letting that happen.

"The upfront costs of buying insurance in the first place are very, very high," says Rob Bhatt, an auto insurance expert with LendingTree. "But then the cost of not having insurance potentially can be a lot higher. It's a really tough thing to balance."

Cutting back and paring down ...

Experts are increasingly recommending that drivers price out insurance costs before they purchase new vehicles. Otherwise, the sticker shock can be painful.

Brandy Levene, in Yakima, Wash., replaced her older vehicle with a 2018 Acura RDX and was stunned to see her insurance bill clock in at $500 a month. She had to cut back elsewhere to pay the bill. "Normally, especially during the summer, we've gone to stay in a hotel and go out of town, maybe go to another state for a couple of days," she says. That all got put on hold.

Then she shopped around. By switching providers, she managed to bring that bill down to $190 a month. That's still more than $2,000 a year. She remembers when her car insurance cost less than she spent on gasoline — now, she says, insurance is more than gas and car maintenance put together.

And, she says with frustration, "I'm not benefiting anything from it because I don't ever file a claim. So it's like I'm just paying this $190, I guess, to prevent from getting a ticket?"

Shannon Martin, an insurance expert with Bankrate, says that, to make matters worse, the rising costs of repairs mean that many people are likely now under-insured, meaning that their insurance might not pay out as much as they'd need if they were in an accident.

"There's a feeling that you're paying more and you're getting less. And that's because you honestly are," Martin says.

In fact, while she knows it's unwelcome advice, Martin says it would probably be a good idea to pay a little extra to increase the limits on a plan that was set up a few years ago, to make sure that any potential future payouts can keep up with your real expenses.

… and postponing teenage driving

Martin has a few tips on saving on insurance. Shop around, of course. For married couples, whoever has better credit should set up the policy. And, she says, "if you have kids in the household, that means you're going to have teen drivers at some point. We don't have to give kids driver's licenses when they turn 16. That's our choice."

That choice recently struck home for Levene. Her 17-year-old son, Josiah, has his license, and a family member has a car they'd be willing to pass down to him. But …

"I went through the process to see what it would cost to add him, and they told me it would be $350 a month," Levene says. "And I'm like, 'Oh, I can't do this … that's so much money.'"

Levene would like it if she didn't have to drive her son to school — and Josiah would certainly love to have a set of wheels.

"Just to go somewhere outside of Yakima," he says wistfully. "Just not being in this cycle where I'm just stuck in this town, stuck with the same life, stuck in the same living situation."

But until he can get a job to cover that insurance bill himself, stuck is exactly what he is.