Tariffs May Drive Up Car Insurance Costs: How Drivers Can Save

By Andrew Keshner
Last Updated: April 3, 2025

In a development that could impact budgets nationwide, recent tariffs imposed on auto imports and parts may soon lead to increased car insurance premiums for drivers across the United States. Market analysts suggest that the insurance industry could incur additional costs ranging from $27 billion to $53 billion over the next 12 to 18 months due to these tariffs, prompting concerns for consumers seeking moderation in their insurance expenses.

The Financial Fallout from Tariffs

As auto-repair parts and labor costs rise alongside inflation, the implications of tariffs on car imports could trickle down to insurance costs. The Trump administration’s latest tariffs, which can reach as high as 25% on specific imports, are intended to bolster domestic manufacturing but will likely add significant costs to vehicle prices and ultimately insurance premiums. In fact, estimates indicate that the annual insurance cost for a single vehicle could increase from approximately $2,300 to more than $2,750 due to these added financial burdens.

Robert Passmore, vice president of the American Property Casualty Insurance Association, explained that the uniform increase in premiums is unlikely because different vehicles feature varying mixes of U.S.-sourced parts. However, he emphasized that every driver will feel some impact from the tariffs since insurance operates on the pooling of collective risks.

According to Gerry Glombicki at Fitch Ratings, these tariffs represent an inflationary tax that insurers will likely pass onto consumers. “All tariffs are a tax and they are inflationary,” he affirmed, underscoring the immediate financial strains on both insurers and drivers alike.

Strategies to Cut Car Insurance Costs

Despite the looming increases in insurance costs, drivers still have options to save. Here are three recommended strategies and a critical warning about one potential cost-cutting move:

1. Shop Around for Better Rates

Finding more competitive insurance rates remains a viable strategy for cost-conscious drivers. A significant 13% of individuals surveyed by J.D. Power reported shopping for auto insurance in the last quarter, reflecting a persistent trend that may continue as prices rise. By seeking quotes from various insurers, drivers may uncover lower premiums, especially before tariffs fully take effect.

2. Consider Higher Deductibles

Drivers might also opt to increase their deductible amounts, which can lower monthly payments. However, this tactic comes with financial risk, as a higher deductible means more out-of-pocket expenses before insurance kicks in. Experts suggest that policyholders only increase their deductibles if they can afford to cover that amount in the event of a claim.

3. Utilize Telematics Programs

Many insurance companies now offer discounts for drivers who allow their behavior to be tracked through telematics—technology that appraises driving habits. By participating in these programs, which monitor aspects like speed and braking habits, drivers can potentially lower their premiums if they demonstrate safe driving behavior.

One Key Move to Caution Against

While shopping for insurance and adjusting deductibles can yield savings, some vehicles may carry a higher risk of increasing premiums based on their mix of domestic and imported parts. With tariffs affecting different cars differently, focusing solely on switching to cheaper insurers without understanding the specific details of your vehicle’s composition may overlook potential future costs.

The Road Ahead

As the insurance landscape evolves in response to these tariffs, drivers should remain vigilant and proactive about their choices. The impact of tariffs on auto insurance will unfold over time, and consumers who take early action may find themselves better positioned when the full effects are felt in premiums.

In the meantime, drivers are encouraged to consider their options thoughtfully, weighing short-term savings against potential long-term costs to navigate the changing auto insurance environment effectively.