After years of relentless increases, auto insurance policyholders have been enjoying a relative break in the recent cycle.
Average full-coverage premiums fell roughly 6% in 2025, according to Insurify analyses, marking the first meaningful decline after rates surged an average of 46% nationwide between 2022 and 2024.
But that calm may not last.
A growing body of industry analysis suggests that the impact of tariffs imposed on imported vehicles, auto parts, steel, and aluminum could begin filtering through the insurance system in the coming months. This could potentially push premiums higher than previously expected.
Insurify projects that the average annual cost of full-coverage car insurance will rise about 1% in 2026. But if tariffs significantly increase vehicle repair and replacement costs, Insurify estimates premiums could rise about 4%.
“While auto insurance rates have not yet fully reflected the impact of tariffs, the underlying cost pressures are already building throughout the automotive supply chain,” Saleh Taebi, founder and CEO at USAWheels, a leading e-commerce platform for wheels, tires, and automotive parts across North America, told Insurify. “Insurance claims are ultimately tied to repair costs. If replacement parts, wheels, tires, sensors, electronics, and other vehicle components become more expensive, the cost of repairing damaged vehicles rises as well.”
“Historically, insurers adjust premiums based on claims costs, so there is often a lag between cost increases in the supply chain and what consumers eventually see reflected in their insurance rates,” he said.
Timing is the enemy. While many tariffs took effect in April 2025, insurance pricing typically lags behind broader economic changes. Insurers often need 12 to 18 months to collect claims data, evaluate cost trends, and obtain regulatory approval for rate changes before those increases reach consumers.
When vehicles become more expensive to repair or replace, insurers pay more to settle claims. Those higher costs eventually flow through to policyholders as higher premiums.
Some industry analysts estimate that the 25% tariffs imposed on imported vehicles and many automotive components would increase insurance costs by roughly 8% on average beyond underlying inflation and other cost pressures. And that may be conservative.
“The tariff math worries me more than the 8% headline suggests,” Josh Katz, CPA and founder of Ohio-based Universal Tax Professionals, told Insurify. “That number assumes a clean pass-through. But parts inflation tends to compound. Repair costs go up, claims get more expensive, and insurers price that risk forward. So consumers can see the hit before the tariff even fully lands, which is part of why rates feel jumpy.”
Katz said several of his clients who own repair shops are already stockpiling parts ahead of the increases, which ties up cash that could be earmarked for other things.
“For consumers, especially retirees on fixed incomes, my advice is boring but it works,” he said. “Raise your deductible if you’ve got an emergency fund behind it, and actually shop your policy every renewal time instead of letting it go on autopilot.”
Many modern vehicles depend on globally sourced components, even when assembled in North America. Replacement parts ranging from bumpers and headlights to sensors and electronic modules frequently cross international supply chains before reaching repair shops.
Recent trade agreements with Japan, South Korea, and the European Union established 15% tariffs on imported vehicles and many auto parts. Together, those trading partners account for tens of billions of dollars in annual U.S. vehicle and automotive-parts imports.
As those higher costs move through supply chains, repair bills are expected to rise.
Some vehicles could be hit harder than others
Not all drivers face the same level of tariff exposure.
Insurify’s tariff analysis found that Buick, Hyundai, Kia, BMW, and Mazda owners could face some of the largest premium increases if tariffs raise vehicle repair and replacement costs. This is due to their reliance on imported vehicles and components.
But that doesn’t necessarily mean owners of those vehicles should expect immediate insurance rate increases. Many factors influence insurance pricing, including driving record, age, gender, location, claims history, and insurer competition.
But vehicles with higher repair costs generally become more expensive to insure over time.
“The tariff situation is the next wave,” said Tom Firestine, founder of Longmeadow Insurance, in Wilmette, Illinois. “An 8% average increase attributable to the 25% auto tariffs sounds manageable until you layer it on top of baseline increases that haven’t stopped.
“Customers on the North Shore [of Chicago] who renewed last spring at a 6% increase are going to face another 10% or more when tariff-driven parts costs work through the system. These things don’t average out. They compound,” he said.
Body shops are already feeling it before the full impact lands, he said. OEM parts from overseas are getting more expensive to source, lead times are stretching, and labor rates aren’t going down.
“When a repair that used to cost $4,200 now costs $5,800, the whole claim landscape shifts,” said Firestine.
More vehicles are being declared total losses
Tariffs may also contribute to another trend already reshaping the insurance industry: the growing number of vehicles declared total losses.
A record 23.1% of auto insurance claims now result in total losses, according to industry data.
The math is straightforward.
When repair costs rise, insurers reach the point where fixing a vehicle costs more than replacing it, and that shift is happening much sooner. A car that might have been repairable a few years ago can quickly become a total loss once parts prices, labor costs, and rental car expenses are added together.
The trend has accelerated in recent years as vehicles become increasingly dependent on expensive electronics, cameras, radar sensors, and advanced driver-assistance systems. Even relatively minor collisions can generate repair bills that run into the thousands of dollars.
“The total loss threshold has been getting hit on vehicles that wouldn’t have been totaled five years ago,” said Firestine. “A 35 mph collision that damages a bumper, a camera mount, and an ADAS module can push repair costs past 70%–80% of actual cash value on a vehicle that drives away from the scene. Tariffs on parts will push that threshold lower, meaning more vehicles get totaled, insurers pay out more actual cash value claims, loss ratios rise, and that feeds directly back into next year’s premiums.”
What drivers can do now
Consumers can take steps to limit the impact of future premium increases.
Drivers who own vehicles with high exposure to imported parts may benefit from comparing quotes before renewal periods, especially while competition among insurers remains strong.
Experts also recommend:
Shopping rates annually
Increasing deductibles if financially feasible
Taking advantage of bundling discounts
Maintaining continuous coverage
Asking about telematics and safe-driver programs
For now, the auto insurance market remains relatively stable.
But the same forces that drove insurance costs sharply higher during the pandemic — supply-chain disruptions, rising repair costs, and more expensive claims — may be gathering again beneath the surface.
The difference is that this time, tariffs could be the tipping point.
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