Why is Car Insurance So Expensive in Your State?

Plenty of things cost more money these days than they did before the COVID-19 pandemic, and unfortunately, car insurance is no exception. As you may have noticed, the Internal Revenue Service (IRS) set the standard mileage rate for 2025 at 70 cents per mile. That’s a 3-cent hike from 2024’s rate, and car insurance rates—which account for 16.2% of vehicle costs on average—are one of the biggest reasons for the increase. 

As we’ve reported previously, national car insurance rates have been spiking in the last few years, and they don’t seem to be leveling off any time soon. According to a January analysis performed by Bankrate, the average American is paying $2,368 annually for car insurance, a 31% increase in the cost of full coverage compared to last year. But that’s just the national average! Insurance rates vary widely from state to state. A Texan might pay significantly less than a Floridian, and in some states, like Minnesota, premiums have surged by more than 50% in the past year.

This warrants a closer look. Let’s dive into what’s causing rising rates throughout this great nation of ours, and then get into the nitty gritty of how those rates look from state to state. 

What Impacts Car Insurance Rates?

So what’s behind the upward trend in the cost of car insurance? There’s no one factor we can point the finger at. One significant contributor is a rise in auto thefts. In August of 2024, the FBI reported that from 2019 to 2023, motor vehicle thefts rose from about 199 thefts per 100,000 people to about 284 thefts. Vehicle theft has an impact on insurance, with car insurers and premiums paying out funds to cover those thefts, and rates reacting accordingly. 

Increases in car accidents have also contributed to rates going up. CNN reported that nearly 43,000 people were killed on U.S. roads in 2021 and 2022, attributing the rise in part to shifts in travel patterns during the COVID-19 pandemic, including an increase in reckless driving. 

Likewise, the height of the pandemic saw a multi-year rise in uninsured driving, with about 14% of U.S. drivers operating a vehicle without liability insurance in 2020, 2021, and 2022, up from about 11% in 2019. Just like theft, uninsured drivers cause cost increases for insurers, as auto insurance companies are legally required to underwrite and process uninsured and underinsured driving claims. 

Another major factor driving up car insurance costs? The rising cost of repairs. More accidents naturally lead to more repairs, but that’s not the only issue. Natural disasters, like hurricanes Helene and Milton last year, have also caused extensive vehicle damage, leading to costly repairs. 

On top of that, repair costs themselves have been climbing. Supply chain disruptions and labor shortages—lingering effects of the pandemic—have made car parts more expensive and skilled labor harder to find. Plus, modern vehicles come equipped with advanced technology that is more complex and costly to fix, further pushing repair prices higher.

What Do Rates Look Like When We Break Them Down By State?

But that’s the national picture—when you break it down by state, car insurance rates become much less straightforward. While federal insurance regulations exist, each state sets its own laws regarding coverage requirements. Factors like infrastructure, population density, crime rates, and cost of living also differ significantly from state to state, leading to wide variations in insurance premiums across the country.

While the average cost of car insurance is about $2,600 naturally, if you’re a New Yorker, you probably wish your car insurance rates were that low. In the Empire State, the average full coverage premium is $3,916 and the average cost of minimum coverage is $1,685, the highest minimum coverage cost in the nation. 

Drivers in Florida and Louisiana also have higher insurance rates than the ‘average’ American. Florida’s average full coverage cost is 58% higher than the national average at $4,171 due to weather risks, uninsured driving, and incident rents in urban areas, while Louisiana’s high accident rate and poor highway infrastructure contribute to its $3,978 average full coverage cost.

On the other end of the scale, citizens of Idaho only have to pay an average of $1,454 annually for full car insurance coverage, almost half the national average. The sparsely populated state of Vermont is also well below the U.S. average at $1,470. In Wyoming, which has a low population and number of licensed drivers but a high rate of accident fatalities, the average cost of full coverage is $1,747, but the average cost of minimum coverage is $263 dollars, the lowest in the country.

How does your own state compare? See for yourself: 

Data Provided by Bankrate

Mileage Reimbursement Made Easy With CompanyMileage

No matter where your business operates, you deserve a cost-effective mileage reimbursement solution. CompanyMileage automates the entire process with our software suite, streamlining expense tracking, approval, and reimbursement.

SureMileage calculates routes using a point-to-point system, allowing employees to log trips, snap receipts, and submit reports from their smartphones. Customizable approval workflows and seamless integration with any major accounting or payroll software ensures fast, hassle-free reimbursements.

As we’ve seen, the price of owning and operating a vehicle can vary quite a bit from state to state. Not sure if you should be reimbursing at the IRS standard mileage rate? Our rate calculator can help you set fair, location-based rates for your mobile employees. 

Our customers save up to 30% on mileage reimbursement expenses when they use our software. To see how you can capture savings like this while providing employees with a superior mileage reimbursement process, schedule a demo with CompanyMileage today.