As Recession Fears Loom, the Majority of Americans Consider Reducing Car Insurance Coverage | Insurify

Inflation, tariffs, and high interest rates are making consumers nervous about the state of the economy. As of May, about one-third of Americans (35%) said they're worse off financially than they were one year ago, according to a new Insurify survey. And 30% said 2025 is the most financially stressful year of their lives.

As fears of a recession mount, most Americans said they're cutting back on spending, with some taking the dangerous step of reducing or dropping their car insurance coverage. Lowering one's coverage could cause severe financial consequences in the event of a major claim or collision, and driving without insurance is illegal in nearly every state. Yet nearly one quarter of policyholders (23%) have considered dropping their coverage for financial reasons.

At a time when the rising cost of living is stretching some Americans' budgets, car insurance adds another significant expense. The national average annual cost is $2,314 — up 42% since 2022. About 38% of Americans said car insurance is unaffordable, and 64% said their rates have increased over the past 12 months, according to Insurify's latest survey. The poll captured financial sentiments from 1,001 Americans.

Insurify's findings illustrate the extent of Americans' economic pessimism, as well as how they're planning to weather financial pressures that lie ahead.

Key findings

More than half of Americans (53%) with car insurance have considered reducing their insurance coverage due to financial worries. About 18% of Americans with coverage have already cut back due to concerns.Of those without car insurance, 19% said they dropped it due to financial or economic concerns. Among those with auto insurance, 23% have considered dropping it because of financial concerns.One-third of Americans (32%) expect tariffs will increase car insurance costs, and 28% believe tariffs will raise home insurance costs.Nearly four in five Americans (82%) have taken steps to brace for a potential recession, including cutting down on nonessential spending and seeking additional sources of income.A majority of Americans (53%), including 59% of Gen Z, believe the cost of living will get worse over the next 12 months.

As costs mount, nearly 1 in 5 Americans have reduced their car insurance coverage

Average car insurance costs increased by about 15% in 2024, putting more financial strain on the typical driver. Two in three Americans (64%) said their car insurance costs have increased in the last 12 months, according to Insurify's survey.

Concerned about the rising cost of living, about 53% of Americans have considered cutting back on car insurance. That includes 18% who said they've already reduced their coverage. Although the potential for savings has persuaded some drivers to opt for cheaper coverage, the choice comes with additional financial risk, particularly due to high levels of dangerous driving behavior and increasingly severe weather, both of which contribute to car insurance claims.

The cost of essential living expenses has soared since 2021, causing consumers to shift their priorities toward cheaper, bare-bones car insurance coverage — opting for liability-only protection rather than full coverage. From January to April 2025, 60% of those searching for car insurance quotes sought liability-only coverage, with 40% looking for full coverage, according to Insurify's database of more than 97 million quotes.

Using that same time frame, over the past three years, about 62% of users searched for liability-only coverage — the cheaper, less extensive option compared to full coverage. That's a noticeable shift compared to 2020–2022, when liability-only accounted for 44% of searches. It's worth noting that the users who were sampled had average or better credit, indicating that even those who are generally financially stable are interested in choosing a cheaper plan.

Of those who don't have car insurance coverage, 19% said they dropped it due to financial or economic concerns, according to Insurify's survey. Of those with auto insurance, 23% have considered dropping it because of financial concerns.

Driving without insurance is illegal in 49 states and can lead to license suspension, hefty fines, or even criminal charges. It could cause devastating financial fallout in the event of a crash. The only state that doesn't require insurance, New Hampshire, still requires drivers to demonstrate their ability to meet financial responsibility requirements.

Insurify's survey also found that 47% of those with home insurance have considered reducing their coverage because of financial concerns, including 15% who already have. Lowering one's home insurance coverage could leave homeowners financially exposed to major losses if their home is damaged or destroyed, especially as certain natural disasters become more frequent and intense.1

As insurance rates rise, comparing policies has become more popular

As insurance costs increase, many Americans are trying to save money by comparing their existing policies with quotes from competing insurance companies. More than two-thirds (68%) of those with auto insurance and 71% of those with home insurance have considered comparing to save. About 30% of each group has followed through.

Another Insurify survey found that the share of Americans who report using insurance-comparison websites increased from 2024 to 2025. The frequency with which drivers compared policies has also increased. The share of drivers who compare policies just once per year dropped from 26% in 2024 to 16% in 2025. But the share of drivers who compare every six to 11 months rose to 19% in 2025, up from 15% last year.

Comparing policies has proven effective for some drivers, who can save up to 30% on insurance costs.

Comparing is especially useful for Americans who already struggle to pay for car insurance. Nearly two in five Americans (38%) already say car insurance costs are unaffordable, including 50% of Gen Z and 43% of Americans with a household income of less than $50,000.

Given that insurers generally see younger drivers as more of a risk and charge them higher rates to mitigate that risk, it's understandable that Gen Z drivers have a harder time affording car insurance costs. Insurify data shows that drivers in their 20s pay roughly $3,168 annually for full coverage — over $1,000 more than drivers in their 60s pay ($1,860).

Two-thirds of Americans expect tariffs to raise prices, including for insurance

Tariffs are throwing a wrench in economic expectations for experts and consumers alike. Two-thirds of Americans (67%) expect that tariffs will increase prices on goods and services, while just 28% expect tariffs to help the economy in the long run.

Insurify projects that tariffs will also increase costs for home insurance and auto insurance, roughly by $100 per year for the average policyholder, though that varies by location and other specifics. That may come as a surprise to most Americans, as only 32% expect tariffs to increase auto insurance costs, and 28% expect tariffs to increase home insurance costs, according to the survey.

The cost of car insurance depends partially on the cost of replacement parts. Most content used in the vehicles Americans purchase comes from outside the U.S., according to the White House.2 As a result, insurers have to pay tariffs on some of those replacement parts, driving up their costs in the event of a claim. From there, insurers pass the cost on to consumers in the form of higher premiums.

Overall, about 59% of Americans said they are concerned about tariffs, making it the second-most common economic concern following inflation (70%). Only 7% of survey respondents said they are not concerned about any economic issue.

Nearly 4 in 5 Americans say the economy is on track for a recession — or is in one already

Americans are overwhelmingly pessimistic about the state of the economy — 40% say the U.S. is in a recession now, and 37% say the U.S. isn't in a recession but is on track for one.

Economists generally define recessions as two consecutive quarters of decline in real gross domestic product. Real GDP rose in the last quarter of 2024 but declined in the first quarter of 2025 by about 0.3%.3

Additionally, 82% of Americans say they have taken steps to prepare for a potential recession. The most common include cutting back on nonessential spending (47%) and looking for additional income sources (33%).

About one in five respondents said they've put off buying a car. That figure is consistent across all generations surveyed, indicating that it's not just younger Americans making financial sacrifices.

One reason for Americans' negative outlook is the cost of living. A majority of Americans (53%) believe the cost of living will be worse one year from now, including 59% of Gen Z.

Stock market volatility has compounded people's financial fears. Following additional tariff announcements, by April 8, the S&P 500 index had dropped 18% below its previous high.4

About 65% of Americans with investments said they have changed their investment behavior as a result of recent stock market trends. That includes 27% who have paused regular contributions and 25% who have moved money toward less volatile investments, such as bonds or CDs.

Tips: Navigating rising costs for car insurance

Despite rising insurance costs, drivers still have some options for saving money on car insurance premiums. A common first step is comparing one's policy to other policies offered by competing insurers. In some cases, drivers discover that another company can offer them similar coverage at a better rate.

Another option is increasing one's deductible, which will lower monthly premiums but shift more of the financial burden onto the driver in the event of a claim. Additionally, drivers who don't want to change insurers can check with an agent to see if they're eligible for various discounts by doing things like opting for paperless communications or bundling policies.

A policyholder's personal driving record remains the most important thing insurers take into account. Practicing safe, defensive driving and cutting down on risky driving habits can limit a driver's chance of getting into a collision, protecting them from physical harm and keeping their insurance rates as low as possible.

Methodology

The proprietary data featured in this study comes from an online survey that Insurify commissioned. The survey's respondents consisted of 1,001 U.S. residents between 22 and 70 years old who own and or lease a car. Respondents were asked up to 15 questions about their financial situation and views on the economy, among other topics. The survey fieldwork took place from May 2 to May 7, 2025. This article also contains certain insights from a previous survey of 1,400 drivers aged 18 to 54, conducted from Jan. 24 to Jan. 28, 2025.

For media inquiries or questions about our study, please contact the author here.