The U.S. war with Iran has added a new layer of uncertainty to the global economy. The conflict has led to rising oil prices and supply chain breakdowns, raising questions about what other costs it could drive up.
For now, car and home insurance companies aren’t raising alarm bells. Inflation and supply chain problems have caused rising rates in the past — like in 2022, following the pandemic. But disruptions from the conflict in Iran aren’t likely to raise insurers’ costs by that magnitude.
Indirectly, the war could actually put downward pressure on car insurance premiums, as higher gas prices generally discourage driving. If Americans drive 10% fewer miles in 2026, the average annual car insurance premium could fall to $2,209 by year’s end. That’s less expensive than it is today and cheaper than Insurify’s end-of-2026 projection, which data analysts calculated before the start of the war.
In other words, drivers reducing their mileage by 10% could result in the average cost of car insurance falling, rather than rising, by the end of 2026.
“When gas prices are higher, people drive less going into the summer, so we should expect frequency [of claims], all things considered, for personal cars, to come down,” Michel Léonard, chief economist at the Insurance Information Institute (Triple-I), said. “Fewer people on the roads, fewer people going long distances … that’s a net positive.”
To find out how higher gas prices could influence car insurance premiums nationally and at the state level, Insurify analyzed the potential impact of drivers reducing their mileage using its database of car insurance quotes.
Key findings
The Iran war could result in Americans driving less, potentially lowering their car insurance premiums. The average price of gas rose 37% from the week before the war to mid-April ($2.94 to $4.04 per gallon).
When gas prices rise by 10%, Americans drive 3% fewer miles on average. If gas prices remain near or at their current levels, Americans’ typical miles driven could fall 10% to 12% by the end of 2026.
Before the war, Insurify projected car insurance prices would rise 0.7% by the end of 2026. But less driving generally lowers risk for insurers and could prompt lower rates. If Americans drive 10% less for the rest of 2026, annual full-coverage car insurance premiums could fall 0.6% on average, from $2,222 to $2,209 by the end of the year.
Americans could end up spending an extra $385 on gas in 2026 as a result of rising oil prices, even if they drove 10% fewer miles. Meanwhile, the average driver would save just $27 in insurance costs by the end of the year if they cut their mileage by 10%.
Inflation and higher prices for car parts could put upward pressure on insurance rates if sustained. The average cost of auto parts is up 4% since last April, the highest year-over-year figure since April 2023.
High gas prices could drive a 1.2% drop in insurance costs vs. pre-war projections
Car insurance premiums are a reflection of risk. When drivers spend less time on the road, the chances of an accident decrease, lowering their risk of filing a claim and an insurer’s risk of making a payout. On average, people drive roughly 3% fewer miles when gas prices rise 10%, according to a 2022 study titled “Time on the road and the price of Gasoline: Evidence from ATUS and NHTS.”1
If prices stay high, Americans could end up cutting down their mileage by 10% or more, as the average cost of gas is up 37% since the week before the war.
A 10% decrease in average mileage could mean lower full-coverage car insurance rates for the typical driver by the end of 2026. The average cost of car insurance at the end of 2025 was $2,222 per year. Before the war, Insurify projected a 0.7% increase for 2026, up to $2,236. But Insurify data scientists project that if the average driver travels 10% fewer miles, the cost would fall to $2,209, a decrease of 0.6% by the end of the year and a net decrease of 1.2% ($27) from Insurify’s pre-war projection.
The average American drives about 13,482 miles per year, and states where people tend to drive the most would see the biggest drop in insurance costs due to higher gas prices. In Wyoming, the state with the highest average mileage, drivers could end up paying $44 less for insurance by the end of 2026 than they otherwise would.
Drivers could end up spending more on gas in 2026, despite traveling less
Of course, less mileage would also mean spending less money on gas. For the average American, cutting down their annual mileage by 10% would save about $223 on gas, assuming a fixed gas price of $4.04 per gallon and 24.4 mpg.2 But that doesn’t take into account that gas prices were lower before the war, at $2.94.
Before the war, the average American was on track to spend about $1,626 on gas over 13,482 miles (12 cents per mile) in 2026, based on an average gas price of $2.94. If drivers reduce their annual mileage by 10% in 2026 and gas prices remain at $4.04, then drivers could spend $385 more on gas, despite driving 1,348 fewer miles — $2,011 at 17 cents per mile.
To spend the same amount on gas over a year ($1,626), with post-war gas prices, the typical driver would need to cut their annual mileage from 13,482 to 9,811, a 27% decrease of over 3,500 miles.
How inflation and other economic factors affect car insurance rates
Insurers constantly try to match the premiums they charge with the financial risks (i.e., potential losses) they face to achieve a sustainable financial position. Many of the risk factors for car insurance are based on a driver’s profile, such as age, location, and claims history. But insurers may also file to adjust rates following economic developments that can affect their financial losses.
Inflation plays a significant role in the premiums drivers pay. If inflation raises the cost of replacement parts, insurers can safely expect the typical car insurance claim to cost more money than before. And the insurer, in response to that rising financial liability, will often raise its premiums to maintain balance.
The cost of vehicle parts and equipment, which influences insurance rates, was flat in the first two months of 2026 but rose 0.7% in March. There’s little way to know if the conflict, which began Feb. 28, influenced that increase, but the rise in parts costs could trickle down to drivers. If vehicle parts costs remain 0.7% higher, that could influence the cost of full-coverage car insurance.
“Insurers tend to raise car insurance premiums if they see that they’re spending more on claims. And claims get more expensive when parts prices go up,” Insurify Senior Carrier Partnerships Manager Daniel Lucas said. “For now, it’s difficult to see the conflict having more than a negligible effect on parts prices, but the situation is still developing.”
Supply chain disruptions can also influence insurers’ losses and, therefore, can show up in drivers’ premiums. If a driver needs a new bumper, and delivering that bumper now takes two weeks instead of one, insurers may have to spend more on paying for temporary rental cars or storage fees with a repair shop.
Tariffs can also influence car insurance costs because they can raise the price of replacement parts. Higher parts costs can drive up the average cost of a repair, which leads to higher claims payments and losses for the insurer. The U.S. Supreme Court struck down some tariffs from 2025, but auto-related tariffs remain in place.3
As of April, car insurance premiums haven’t risen noticeably due to auto tariffs, but insurers are still keeping an eye on the issue. Progressive drew attention to potential tariff effects in a March report.
“While our focus has been on trying to maintain stable rates for customers, effective tariffs and other retaliatory actions may result in higher loss costs, which could result in a reduction in profitability and the possible need for rate increases throughout 2026,” the insurer wrote.4
Tips: Here’s how drivers can save on premiums for car insurance
While the Iran war in itself may not spike car insurance rates, average full-coverage premiums are up 42% since the end of 2021. Still, Americans can cut down on their car insurance costs by practicing some savvy shopping and driving habits.
Comparing insurance rates among different companies is one of the simplest ways to gauge whether they’re spending too much on coverage. An Insurify survey found that, among drivers with outstanding credit, those who have compared policies in the last two years pay 20% less than those who haven’t.
Driving less, when possible, can help mitigate rising insurance costs. Though other factors are influential, a safe driving record is often the most important aspect in car insurance pricing. When a driver spends more time on the road, their likelihood of filing a claim generally goes up.
Drivers tend to know about some car insurance discounts, but not all. While insurers often cite bundling and safe-driver discounts, many also offer discounts for things like equipping anti-theft devices, paying for a policy in full, enabling automatic payments, and maintaining low mileage. Drivers who want to ensure they’re taking full advantage of discounts can call their existing insurance agent to find out.
Methodology
Insurify’s data scientists examined more than 196 million rates in its proprietary database, quoted via integrations with partnering insurance companies. 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.
Full-coverage premiums correspond to policies with bodily injury limits between state-minimum requirements and $50,000 per person, $100,000 per accident; property damage coverage between $10,000 and $50,000; and comprehensive and collision coverage with deductibles of $1,000.
To project how much the average driver will pay for full-coverage insurance by the end of 2026, Insurify data scientists analyzed the latest pricing trends in each state as well as expected industry-level loss ratios in 2025. They then used this information to project rate-change magnitude in every state through the end of the year.
To estimate the impact of lower gas prices on car insurance rates, Insurify data scientists examined the relationship between gas prices and miles traveled for U.S. drivers. From there, they analyzed quotes from Insurify’s proprietary database to identify the relationship between estimated miles traveled and full-coverage insurance premiums. Insurify extrapolated those calculations to project how a 10% reduction in mileage for the average driver could impact insurance rates. Insurify calculated the expected effects on auto insurance prices on a national level and then equally distributed them across states.
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