Insurance: Climbing Coverage Costs Cut into Consumer Budgets
Property insurance payments, including auto and housing insurance, have continued to rise, albeit at a slower pace in the year through May 2025, according to Bank of America internal data. The median payments increased by 6% year-over-year and have risen by over 40% since June 2020-May 2021. This surge has pushed household property insurance payments as a percentage of income to 5%.
The growth in payment is slightly skewed towards younger generations, who are likely at a life stage requiring more living space and larger vehicles. Geographically, most states have experienced similar increases in property insurance payments. However, Texas and Washington have seen slightly larger rises, while New Jersey and Michigan have observed smaller increases.
The outlook for property insurance payments is complex. On the positive side, the vehicle fatality rate has decreased from its post-pandemic peak, and car price inflation is currently low, which could help stabilize auto insurance payments. However, the risk of tariffs increasing car prices poses a potential threat, putting upward pressure on auto insurance payments. Meanwhile, house price inflation has slowed across the U.S., alleviating some pressure on home insurance. The risk of continued escalation in claims due to acute weather-related events complicates the outlook further.
