You probably don’t spend much time thinking about international trade policies when you’re paying your insurance bill. But did you know that tariffs—those taxes on imported goods—could be driving up the cost of your auto and home insurance?
Imagine this: You get your car insurance renewal notice, and your premium has jumped—again. Or after a storm, you need home repairs, but the costs are through the roof. It’s not just bad luck or inflation at play. Tariffs on materials like steel, lumber, and semiconductors are making repairs more expensive, which means that large insurers may have to pass those costs on to consumers.
In this post, we’ll break down how tariffs are shaking up the insurance industry, how your rates could be affected, and some tips on what you can do to help keep your premiums in check. Let’s dive in.
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3 Ways Tariffs Are Making Insurance More Expensive
The U.S. government’s tariffs on imports from Canada, Mexico, and China have real consequences for the insurance industry, particularly for homeowners’ and auto insurance. The uncertainty surrounding trade wars makes it harder for insurers to make long-term decisions. As a result, companies are frequently revising their earnings projections to keep up with shifting economic conditions. In other words, when the economy struggles, so do insurers, and that typically translates into higher costs for policyholders.
Why?
Homes and cars are built with materials like steel, aluminum, lumber, and semiconductors, all which could soon be hit with double-digit import taxes. When the cost of materials goes up, so does the cost of repairs and replacements. And that cost eventually trickles down to consumers in the form of higher prices.
Let’s take a look at three main ways tariffs are making insurance more expensive.
1. Higher Costs for Repairs and Replacements
Think about what goes into rebuilding a home after a storm, fixing a car after an accident, or replacing a roof damaged by hail. Materials like steel, lumber, and auto parts are essential for these repairs—and tariffs drive up their prices.
So, when an insurance company has to pay out more for claims, they adjust their pricing models and pass those costs on to policyholders.
The result?
Higher premiums.
2. Supply Chain Disruptions and Inflation
Tariffs don’t just make specific products more expensive; they also create uncertainty in the supply chain. Businesses face increased costs, delays, and potential shortages—all of which drive inflation.
For insurers, this means a higher likelihood of cost overruns and operational delays when fulfilling claims, especially for business insurance policies like property coverage or business interruption insurance. To mitigate these risks, insurers raise premiums, ensuring they have enough financial cushion to handle unpredictable costs.
3. Economic Uncertainty
Tariffs often come with unpredictable changes in trade policies, which can lead to economic instability. When insurers don’t know what future costs will look like, they take a more conservative approach—meaning they set higher premiums to cover potential risks. They’d rather overestimate than underestimate the cost of claims in an uncertain economy.
The Effect on Auto Insurance
Auto insurance rates are already on the rise, and tariffs could accelerate that trend. Higher prices for steel and aluminum mean increased manufacturing costs for cars and more expensive parts for repairs.
Insurance companies rely on accurate pricing models to set premiums, but when the cost of claims becomes unpredictable, they’re forced to hedge their bets to cover unexpected losses. Like any business, they cover this risk by increasing prices.
Auto insurance premiums are already on the rise with full-coverage car insurance premiums expected to increase by 8% by the end of 2025, bringing the average yearly cost to $2,502. Even without the tariffs, Insurify estimates a 5% increase in premiums.
So, why does a tariff on imports affect your car insurance?
It all comes down to parts. The U.S. heavily relies on Canada, Mexico, and China for car components, and many of these parts cross borders multiple times before final assembly.
When tariffs raise the price of these parts, repair costs go up—and so do insurance claim payouts when you get into an accident. Insurers, in turn, pass those higher costs on to you in the form of increased premiums.
The Effect of Tariffs on Homeowners Insurance
Homeowners insurance is expected to increase due to three major factors: the rising cost of building materials, the rising cost of rebuilding, and a decrease in the labor force in the construction industry.
Insurance companies are always assessing risk and costs. When the price of repairs goes up, insurers have to adjust their policies accordingly. That could mean higher premiums for homeowners.
It doesn’t stop there. If construction materials are more expensive and harder to get, delays in home repairs are likely. That means more people needing temporary housing while they wait, which further increases insurance claims and the costs associated with them.
Rising Costs of Building Materials
Picture this: A storm damages your roof, and you need repairs. Unfortunately, tariffs on building materials like lumber, steel, and aluminum have increased the cost of those repairs.
Why?
Nearly 15% of total U.S. imports are construction-related goods, with Canada alone supplying half of all wood imports. If tariffs drive up material costs, repairs after a disaster could become significantly more expensive.
The Cost of Rebuilding
What if you have to rebuild your home or are planning to build a new one?
The lumber, steel, and variety of other materials needed to rebuild your home after a natural disaster becomes significantly more expensive. And just like with auto insurance, when insurers face rising costs, they pass those costs along to policyholders. That means higher premiums for homeowners, whether your rebuilding or building new.
Labor Woes Add to the Problem
It’s not just materials that are affected—labor costs are spiking too. The construction industry has the highest percentage of undocumented workers of any sector. With stricter immigration policies, the available workforce is shrinking. Fewer workers mean higher wages and slower project completion times. Again, this trickles down to homeowners in the form of pricier repairs and potentially higher insurance rates.
What Can You Do?
So, what does all this mean for you? While you can’t control tariffs, you can take steps to protect yourself. These tips may help you reduce your costs and maintain the coverage you need to protect yourself.
- Review Your Policy – Make sure you understand your coverage and any potential gaps.
- Consider Replacement Cost Coverage – This ensures you get the full cost of rebuilding your home, not just its depreciated value.
- Stay Informed – Keep an eye on policy changes and construction costs in your area.
- Shop around – Compare insurance rates regularly to make sure you’re getting the best deal.
- Increase your deductible – A higher deductible can lower your premium, but make sure you can afford it if you need to file a claim.
- Look for discounts – Many insurers offer discounts for bundling policies, maintaining a clean driving record, or even driving less.
- Maintain a good credit score – In many states, insurers factor in credit scores when setting rates.
- Bundle your policies – Many insurers offer discounts if you combine home and auto coverage.
Final Thoughts
Tariffs might seem like a distant issue, but they have a direct impact on everyday expenses—like the cost of insuring your car and home. As trade policies continue to shift, it’s worth keeping an eye on how these changes might affect your wallet because in the world of insurance, what happens on the global stage often ends up hitting close to home.
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*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the services or products listed here. Please get in touch with your local agent to learn how we can help with your insurance needs.
Sources
CNBC. Here’s why Trump tariffs may raise your car insurance premiums. https://www.cnbc.com/2025/02/24/heres-why-trump-tariffs-may-raise-your-car-insurance-premiums.html
DSP. How Would Tariffs Impact the Insurance Industry? https://www.dspins.com/blog/tariffs-impact-insurance/
Insurance Business Magazine. Trump tariffs – what’s the ripple effect on insurance? https://www.insurancebusinessmag.com/us/news/breaking-news/trump-tariffs–whats-the-ripple-effect-on-insurance-524108.aspx
Insurance Business Magazine. Trump’s second term: What it means for climate risk and insurance. https://www.insurancebusinessmag.com/us/news/breaking-news/trumps-second-term-what-it-means-for-climate-risk-and-insurance-519727.aspx
Insurance News Net. How will Trump tariffs, other policies impact the insurance industry? https://insurancenewsnet.com/innarticle/how-will-trump-tariffs-other-policies-impact-the-insurance-industry