- Projected Car Insurance Costs in 2026: The average full-coverage car insurance price is expected to rise modestly to $2,158 by the end of 2026, after years of significant increases.
- State-by-State Premium Changes: While 39 states saw a decrease in premiums in 2025, some states like Washington, D.C., and Michigan experienced sharp increases, highlighting regional disparities.
- Factors Influencing Future Premiums: Rising repair costs, tariffs, and regulation changes, especially in states like New Jersey, could disrupt recent stability and lead to higher rates.
- Tips for Saving on Car Insurance: Shopping around, comparing quotes, and asking about discounts can help drivers find more affordable coverage, especially as prices vary significantly among providers.
The average cost of full-coverage car insurance will climb to $2,158 by the end of 2026, according to Insurify’s newly released American Driver Report. That represents a modest 1% increase from 2025 levels, a welcome shift after years of double-digit premium hikes that pushed auto insurance costs up 46% between 2022 and 2024.
The report, which draws from more than 190 million real insurance quotes, paints a picture of a market in transition. Thirty-nine states saw premiums decline in 2025, with eight posting drops of 15% or more. Wyoming led the way with a 30% reduction, followed by Iowa at 25% and Arkansas at 23%. For drivers in those states, annual costs have fallen to levels not seen in years.
But that relief has not reached everyone. Ten states recorded premium increases in 2025, with some climbing by hundreds of dollars. New Jersey saw rates spike 20%, pushing the state from 15th to 6th on the list of most expensive markets. Washington, D.C., now tops the nation at $4,017 annually for full coverage, nearly double the national average. Michigan jumped from 12th to 4th most expensive after a 12% increase brought its average to $3,073.
The divergence reflects what Insurify senior economic analyst Matt Brannon calls a compounding of risk factors in densely populated, high-cost-of-living areas. More crashes, more claims, and higher repair costs create a cycle that keeps pushing premiums upward in those markets even as the rest of the country stabilizes.
Insurers themselves have emerged from a difficult period. After years of losses that forced aggressive rate increases, many carriers have returned to profitability. State Farm, the nation’s largest auto insurer, announced rate reductions affecting millions of customers heading into 2026. The company cited less costly physical damage claims as the primary driver. In Florida, State Farm has cut rates by more than 20% since late 2024, putting an estimated $1 billion back into policyholders’ pockets. In Louisiana, the company secured approval for a 5.9% decrease affecting more than one million customers.
The improved financial picture has shifted insurers’ focus from raising rates to competing for customers. J.D. Power’s 2025 Insurance Shopping Study found that 57% of auto insurance customers actively shopped for a new policy in the past year, the highest rate in the study’s 19-year history. That surge in shopping came as drivers sought relief from premium increases that had reached multi-decade highs in early 2024. With carriers now cutting rates to attract business, 2026 is shaping up as what J.D. Power calls a buyer’s market for car insurance rates.
Several factors could disrupt the stability. Repair costs continue climbing as vehicles incorporate more sensors, cameras, and advanced driver assistance systems. A minor fender-bender that once required a simple bumper replacement may now involve recalibrating multiple high-tech components. Electric vehicles present particular challenges, with repair costs running 18% higher than gas-powered equivalents, though that gap has narrowed from 23% in 2025 as more shops gain expertise in EV repairs.
Tariffs pose another wildcard. If sustained tariffs increase the cost of auto parts, insurers may pass those expenses to policyholders. Brannon cautioned that a projected 1% national increase could turn into 4% if tariff-driven costs materialize. For now, he noted, insurer margins are healthy enough to absorb such pressures without immediate rate hikes.
New Jersey faces additional cost pressures from a regulatory change that took effect on January 1, 2026. The state increased its minimum liability coverage requirements to 35/70/25, meaning $35,000 per person and $70,000 per accident for bodily injury, plus $25,000 for property damage. This marks the second phase of a reform signed into law in 2022. More than 1.4 million drivers who previously carried lower limits will see their policies automatically adjusted at renewal, with corresponding premium increases.
ValuePenguin’s State of Auto Insurance 2026 report offers a slightly different picture, putting the national average at $208 per month, or about $2,496 annually. That analysis identifies Nevada, Louisiana, Florida, Connecticut, and Delaware as the five most expensive states, with the first three exceeding $300 per month. At the other end, Vermont, Maine, and Wyoming offer the cheapest coverage, with rates at least 37% below the national average.
The vehicle you drive affects what you pay. The Toyota RAV4 and Honda CR-V rank as the most affordable new cars to insure at about $214 per month for full coverage, roughly 14% below average. Tesla’s Model Y sits at the opposite extreme at $354 per month, making it the most expensive new car to insure in 2026. Two Tesla models, the Model S and Model X, were the only vehicles among the 50 most quoted to see insurance rate increases in 2025.
For drivers looking to reduce their costs, shopping around remains the most effective strategy. The Zebra’s research shows that rates can vary dramatically depending on the carrier. Five of the ten largest insurance companies are expected to lower rates in 2026, while midsize insurers like NJM may raise rates by more than 20%. Drivers who compare quotes often find savings of $100 or more annually. Beyond comparison shopping, experts recommend asking about discounts for bundling policies, maintaining a clean driving record, and enrolling in usage-based insurance programs that reward safe driving habits.
Finding the best car insurance requires balancing price against coverage adequacy. The minimum coverage that satisfies state law often falls short of what a serious accident can cost. J.D. Power found that 26% of customers now carry deductibles of $1,000 or more, and 7% have avoided filing claims for fear of rate increases. Total loss claims now account for 27% of all claims, up from 16% in 2022, as rising repair costs push more vehicles past the point of economical repair.
The outlook for the rest of 2026 hinges on whether the factors that eased pressure in 2025 continue. Accident frequency has declined in many markets, contributing to fewer claims. Litigation reform in states like Florida has reduced legal costs that had been driving up premiums. If those trends hold and repair cost inflation moderates, the stabilization could persist. But the growing gap between expensive and affordable markets suggests that where you live may matter as much as how you drive when it comes to what you pay for coverage.
