Do you know how much your auto and/or home insurance premiums increased last year?
Insurance premium rates have been one of the fastest growing line items in most household budgets for years, far outpacing inflation for other expenses. In 2024 alone, the typical policyholder premium increased by:
- 17% to more than $2,100 per year on average in the U.S. for auto insurance; and
- 10% to more than $2,600 per year on average nationally for home insurance
These substantial increases, on top of other living expense increases, have squeezed family finances even tighter. In some cases, to the point where individuals and families have been forced to drop coverage altogether. Despite these growing costs, insuring your assets is critical to protecting yourself from potentially large financial losses, and in most cases are required to operate a motor vehicle and own a home.
While you may understand the importance of insurance for managing financial risks, you may not have realized there are ways to lower your premiums and potentially save a lot of money.
If you are interested in learning more about insurance costs and savings opportunities, as well as how to calculate the financial impacts of your buying decisions, please read on.
Do I need auto or home insurance?
Before looking at costs, you might be asking yourself if insuring your auto or home is necessary.
Almost all states require drivers to maintain a minimum level of liability insurance. Specific requirements vary by state, including the types and amounts of coverage needed. For example, in New Jersey, and New York state, there are minimum liability coverages that must be maintained. It is very important to check the specific auto insurance laws for the state you reside in. Having the proper auto insurance helps to protect yourself financially.
For home insurance, while there’s no federal or state law that mandates it in the same way that auto insurance is often required, if you have a mortgage on your home then your lender will almost certainly require you to have home insurance. This is to protect their investment in the property. If you own your home outright, without a mortgage, you’re generally not legally required to have home insurance. However, even in this case, it’s highly advisable to have coverage to protect your significant financial investment. Having insurance offers policyholders with a “safety net” for the unexpected, but the price of that protection comes with expanding premium costs.
What will I pay?
It’s important to understand that insurance costs vary significantly based on numerous factors, including location, coverage levels, and individual circumstances, but here are concerning national trends to consider:
Auto premium growth
According to The State of Auto Insurance in 2025 report, the average cost for auto insurance has risen substantially with average rate increases of 16.5% in 2024 and 12% in 2023. In 2025, insurers are expected to raise rates 7.5% on average. Since 1982, auto insurance rates have risen more than twice as fast as general inflation, according to usafacts.org (see chart below).
With these premium increases, the national average annual cost of full coverage car insurance is now $2,101, but can range from $1,236 to over $3,400 depending on your state. These numbers fluctuate based on the source of the data, and the type of coverage included in the average.
Recently enacted tariffs, which will increase the cost of imported cars, parts and associated auto repair costs, are projected to increase your insurance premiums even more, from $35 to $120 per vehicle per year by some estimates.
Homeowners’ premium growth
Home insurance premiums rose an average of 10.4% in 2024, with rates rising more than 20% in some states, according to S&P Global. Home insurance rates are expected to continue rising in 2025, with homeowners potentially seeing increases of 10-15% or more, driven by factors like rising repair costs and more frequent natural disasters.
According to Insurance.com, the national average annual cost of home insurance in the U.S. is now $2,601 annually, or $217 monthly for $300,000 in dwelling coverage, but can vary significantly depending on your state. These numbers fluctuate based on the source of the data, and the type of coverage included in the average.
Average costs by state
Where you live plays a significant role in determining your insurance rates. Factors that influence your insurance rates based on location include population density, crime rates, traffic and accidents, local regulations and costs, road conditions and weather risks.
States with the highest combined auto and home insurance costs are Oklahoma, Florida, Colorado and Kansas. States with lowest combined costs are Hawaii, New Hampshire, Vermont and Maine. Premium cost data by state is available as worksheets in the financial planning and opportunity cost calculator download (link below).
Ways to your lower rates
With past and future rate increases, it is very important to make sure you have the right level of coverage, take advantage of all discounts, and re-shop your policy. Roughly one-third of individuals with home or auto insurance haven’t re-shopped their policy for better coverage and lower premiums, according to insurance comparison website Policygenius. Being a loyal insurance customer can cost you more than you save over time, so experts suggest that you re-shop your policies annually.
Here are a few ways you can lower your property insurance premiums:
| Ways to Save | Auto | Home |
| Compare/re-shop policies | Shopping around can save between 32.9% and 77.7% in car insurance costs, at an average savings of 56.3%. | Compare home insurance premiums by company. The difference in price between insurers can be hundreds of dollars for same policy. |
| Research discounts | There are many potential auto insurance discounts that could reduce the cost of your premiums, such as taking a defensive driving course, being a good/safe driver, and low mileage usage. | There are many potential home insurance discounts that could reduce the cost of your premiums. Buying a newer home or upgrading your home qualify for highest discounts. |
| Increase deductibles | Increasing your deductible from $500 to $1,000 can reduce your premium by up to 20%. | The Insurance Information Institute estimates that raising your deductible from $500 to $1,000 can slash your premiums by up to 25%. |
| Improve credit score | On average, drivers with poor credit pay 106 percent more for full coverage car insurance than those with excellent credit. | Homeowners with poor credit pay an average of 78 percent more for home insurance than homeowners with excellent credit. |
| Bundle policies | Bundlers are likely to save 17% on insurance premiums, on average. | |
Before you raise your deductible, make sure you have enough savings available to cover unplanned repairs to your auto or home. If you can avoid filing small claims and pay for them out-of-pocket rather than having your insurer cover, then it may mean your policy will not increase because you have filed too many claims. Also, consider who you are using for roadside assistance, and whether you’re getting the best deal. For example, using roadside assistance offered by your insurer may increase your premiums.
Impacts to your budget
As referenced in my book Making Big Money Decisions, insurance costs need to be factored into your Total Cost of Ownership (TCO) for an auto and home. Most people don’t consider their opportunity cost when deciding which car or house to buy. For example, in addition to your circumstances, the make and model of an auto you choose to drive, and the place you call home, factor into your premium amount. Consider the illustration below, which shows the difference in the annual cost of insurance premiums over five years based on selecting assets A or B.
If you invested those cost savings, the financial value generated over time is considerable. In this illustration, the future value of investing the opportunity costs from lower insurance premiums (Car B + House B) is over $50 thousand. By generating these savings you create financial flexibility, and with it you can take advantage of new opportunities like investing in current or new real estate.
When it comes to planning your costs over time, I recommend using a spreadsheet to estimate your current and future budgets, as shown below. Take the recommended steps, including periodically re-shopping your policies, to reduce your premiums now and in the future. It will ensure you are paying the best price for insurance coverage.
The financial planning and opportunity cost calculators* can be downloaded and updated with your financial data.
Getting started
Whether you’re a first-time buyer or re-shopping, be prepared to understand coverage options and discount opportunities. The good news is that there are many self-service (DIY) and agent-assisted resources to help you understand your purchasing options. This infographic can help you get started.
After you buy, expect premium prices to increase over time, especially if you file claims. If you haven’t filed a claim recently and have already secured all available discounts, then I recommend you set a goal for re-shopping your policies every 2-3 years. And always consider the implications of your asset decisions on your financial plans and potential opportunity costs.
It Pays to Know!
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*Excel file with five worksheets for estimating your auto and home insurance budgets, and comparing the average premium price differences between states. The financial models are copyrighted material, and for personal use only.