WASHINGTON — Americans are dedicating an increasingly large portion of their income to insurance for cars, homes, health, and other personal coverage, according to recent data and analysis.
Average consumer spending on premiums for health, auto, home, life, and other personal insurance exceeded $7,000 in 2023, representing about 8% of the average after-tax income. This marks a 31% increase from 2013, when Americans spent roughly 6.1% of after-tax income on insurance premiums, according to Bureau of Labor Statistics data analyzed by MarketWatch.
The financial burden is particularly heavy for low-income Americans. While lower-income households spend less in absolute dollars on insurance, premiums represented an average of 23.2% of after-tax income for the lowest fifth of earners in 2023, compared with 5.2% for the highest fifth. These figures do not include deductibles or corporate and government contributions.
Insurance costs are expected to rise further. Median premiums for health plans regulated under the Affordable Care Act are projected to increase by 18% in 2026, following an 11% increase in 2025. Medicare Part B premiums are expected to rise by 11.6% next year, while employer-sponsored health plan premiums are projected to increase by 6%, according to industry analyses.
State-regulated home and auto insurance rates are also climbing due to rising claims from natural disasters and increasing costs for car repairs and parts. In North Carolina, for example, home insurers settled on a 7.5% average rate increase for 2025 and another 7.5% increase for 2026, after initially requesting a 42.2% hike. Auto-insurance rates in the state are set to rise 5% in October, following a previous request for a 22.6% increase.
Although average weekly earnings increased 4.2% year-over-year in July, insurance costs are rising faster than wages, adding financial strain to households. Financial experts note that high insurance costs can force consumers to make trade-offs in budgeting, sometimes resulting in reduced coverage or increased deductibles.
Some Americans have responded by lowering coverage, choosing plans with higher deductibles, or opting out of certain policies entirely. Data from the Insurance Information Institute indicate that a growing number of homeowners and drivers have chosen to go uninsured, often citing affordability as the primary factor.
The insurance industry remains financially strong despite rising claims and premiums. Property and casualty insurers reported $166.8 billion in profits in 2023, life insurers $23.5 billion, and health insurers $9 billion, according to National Association of Insurance Commissioners data. Insurers’ investments in bonds, stocks, and other securities have contributed to strong financial results, along with rising premiums.
While Americans face increasing costs, there are no widely recognized guidelines for how much of an individual’s income should be dedicated to insurance. Unlike housing or transportation, insurance expenditures are largely determined by mandatory coverage requirements and market pricing rather than consumer choice. Coverage requirements can be complex, particularly for homeowners in high-risk areas, who may need multiple policies to protect against different perils.
Analysis indicates that insurance costs as a share of income vary significantly by region. Homeowners in Louisiana, Florida, and Mississippi pay the highest shares of median income on home and auto insurance, while residents in Utah pay the lowest. Overall, the rising cost of insurance has made it a significant portion of many Americans’ household budgets.
