'Premiums will have to increase accordingly': Trump's tariffs could drive up car insurance costs by 13%. Here's how trade policies affect premiums and what you can do to save on car insurance

The hidden impact of tariffs on auto insurance

When tariffs increase costs on imported goods such as vehicle parts, these expenses inevitably trickle down to consumers. Trump’s tariffs on automotive imports, as well as steel and aluminum imports, could significantly raise the costs of car repairs and replacement parts.

“As the price of replacement parts increases, premiums will have to increase accordingly,” said Daniel Lucas, carrier relations manager at Insurify.

This means insurers face higher payouts for claims due to increased repair expenses, and insurance companies have to recoup these losses from somewhere. Typically, this comes in the form of higher insurance premiums for drivers.

Auto repair parts from Canada and Mexico make up approximately 32% of U.S. auto part imports, and vehicle damage accounts for roughly 60% of the costs for full-coverage car insurance, reports Insurify.

These tariffs add layers of additional expenses each time parts cross the border into the U.S., and the compounded effect can substantially increase the overall cost of repairs. For example, if assembling an engine in the U.S. requires importing three separate parts from Canada and Mexico, each crossing the border individually, all three parts will incur its own tariff.

Imagine that the assembled engine then crosses the border again to be installed into a vehicle, and afterward, the entire car is imported back into the U.S. Multiply this scenario across thousands of vehicles and numerous components, and the cost increase becomes substantial.

However, there is some good news. According to Andrew Whitman, a finance professor at the University of Minnesota, consumers may not see these costs reflected in their monthly insurance statements right away.

“It will take some time for that cost to work through the system,” Whitman shared with Insurify. “Insurance companies have to file for rate increases, and those rate increases have to be based on increased claim costs.”

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How to rein in your car insurance costs

While drivers can't control tariff policies, there are several ways to minimize the financial hit of rising insurance premiums.

Shop around

Don't settle for the first quote you get. Rates can vary significantly between insurers, so take the time to gather and compare multiple quotes to ensure you're getting the best rate possible. If you've had the same policy for a while, shop around to see if you can find a better deal — just pay attention to policy details so you don't reduce your coverage without realizing it.

Bundle policies

Many insurance providers offer substantial discounts if you bundle your car insurance with homeowners, renters or other insurance policies. Bundling can simplify your coverage and provide meaningful savings, but make sure to compare all the rates with those from other providers.

Look for discounts

Most insurers provide discounts for specific demographics or meeting certain criteria, such as safe driving records, good grades or installing anti-theft devices. Students, teachers, first responders, military personnel and their families may also qualify for discounts. Ask your insurance provider about discounts that you might be eligible for.

Consider raising your deductible

Increasing your deductible — the amount you pay out-of-pocket before your insurance kicks in — can lower your monthly premium significantly. Just make sure you have sufficient savings to cover the higher deductible in case of an accident. You should also avoid making insurance claims for minor dings and dents, as this can raise your rates.

Compare insurance costs when buying a new car

Different vehicles attract different insurance rates. Before buying a new car, compare how much different car models will cost you in insurance premiums. Opting for cars with lower repair costs or stronger safety records can help reduce your annual insurance expenses.

By understanding the factors impacting your insurance rates and actively managing your policy choices, you can help minimize the impact of tariffs on your wallet.