Where the average tax refund could cover high car insurance costs
This year, 13% of surveyed Americans plan to dedicate at least part of their tax refund to paying for car insurance, and 41% said they’ve used a tax refund to pay for coverage before. The average tax refund in 2025 was $3,052, but the amount and how far the money goes vary by state.
Auto insurance costs also vary significantly by state, but in 34 states, the average federal tax refund could cover the median annual car insurance premium.
Drivers can typically pay for car insurance monthly, every six months, or every 12 months, though some insurers offer even more flexible or customizable payment options. Shopping around and comparing quotes at renewal can help find lower rates, but many insurers also offer 5%–12% discounts to drivers who pay for their policy in full, according to Insurify data.
Interesting Information
Two-thirds of surveyed Americans pay monthly for car insurance, versus 26% who pay in full for a six-month policy and 7% who pay in full for a 12-month policy. Respondents who pay monthly cited convenience as the top reason they pay that way, while those who pay in full for a six- or 12-month policy said it’s cheaper.
Here are the 10 most expensive states for car insurance where the state’s average federal tax refund can cover an annual policy in full.
1. Texas
Average annual cost of full-coverage car insurance: $2,470
Average federal tax refund amount: $2,622
Texas drivers’ reliance on rural roads plays a large part in the state’s high car insurance rates.
The majority (90.4%) of daily vehicle miles traveled statewide are on rural roads, according to the Federal Highway Administration (FHWA).[3]
Certain stretches of rural highways also have an 85 mph speed limit, the highest for any road type in the U.S., according to the Insurance Institute for Highway Safety (IIHS).[4]
Nearly half (43%) of all roadway deaths in the U.S. happen on rural roadways, despite just 20% of the population living in those areas, according to the U.S. Department of Transportation.[5] Factors like these can cause more frequent or severe claims, which can drive up car insurance rates.
Texas also has a high vehicle theft rate of 123.8 per 100,000 people, according to Insurify’s stolen cars report. Severe weather losses can add up, too. Flood and hail damage are the largest drivers of auto insurance claims in Texas, according to the Texas Coalition for Affordable Insurance Solutions.[6]
2. Louisiana
Average annual cost of full-coverage car insurance: $2,370
Average federal tax refund amount: $2,483
The average Louisianan also pays higher car insurance rates, but Insurify data shows those rates are going down. Louisiana’s rates fell by 15% in 2025, and Insurify projects another smaller decrease in 2026.
But while rates are going down, bodily injury claims remain high, and those claims are driving above-average costs statewide, according to the Louisiana Department of Insurance.[7] Louisiana drivers file more than twice as many bodily injury claims per capita as the national average, according to a May 2025 press release.
High litigation costs can drive up auto insurance rates when insurers pass legal expenses on to policyholders through higher premiums, according to the Insurance Information Institute (Triple-I).[8]
3. Mississippi
Average annual cost of full-coverage car insurance: $2,063
Average federal tax refund amount: $2,439
Mississippi has the highest uninsured motorist rate in the country, at 28.2%, according to the Insurance Research Council (IRC).[9] More uninsured motorists on the road increases the likelihood that an uninsured driver could cause an accident. That can increase insurance claims for uninsured motorist coverage and lead to higher overall risk, which shows up in insurance premiums.
Mississippi also has the lowest average credit score in the country: 680, well below the national average of 715, according to Experian.[10] Most states, including Mississippi, allow insurers to use credit history to help determine auto insurance rates, which can also contribute to higher premiums.
Still, car insurance costs in Mississippi are below the national average and relatively stable. Insurify projects a mere 0.3% rate increase in 2026.
4. Missouri
Average annual cost of full-coverage car insurance: $2,061
Average federal tax refund amount: $2,068
Missouri’s average federal tax refund just barely covers the median annual cost of car insurance, and Insurify projects another 0.7% increase in 2026.
Like Mississippi, Missouri also has a high uninsured motorist rate of 20.7%, which can drive up claims costs and premiums statewide.
Climate and theft risk may increase claims frequency in Missouri. Much of the state, including urban areas like St. Louis and Kansas City, experiences frequent hailstorms, according to the National Risk Index (NRI).[11]
Missouri also has a high vehicle theft rate of 142.2 vehicles stolen per 100,000 people, according to an Insurify analysis of National Insurance Crime Bureau data. More frequent damaging hail events and vehicle thefts can lead to higher comprehensive claims costs and insurance premiums.
5. Washington
Average annual cost of full-coverage car insurance: $1,974
Average federal tax refund amount: $2,265
Like Mississippi and Missouri, Washington drivers pay below the national average for car insurance. Fewer climate risks likely to damage vehicles may help keep rates down. But where auto insurance costs fell by 6% nationwide, costs in Washington increased by 2% in 2025, and Insurify projects a 1.8% increase in 2026.
Traffic congestion may contribute to higher rates as well, since it increases the risk of accidents. Seattle is among the worst 25 cities in the world for traffic congestion, according to INRIX’s Global Traffic Scorecard.[12]
Washington also has high uninsured motorist and auto theft rates, which can further increase claims costs and trickle down into premiums.
6. Oklahoma
Average annual cost of full-coverage car insurance: $1,971
Average federal tax refund amount: $2,260
Oklahoma’s below-average car insurance rates mean the average federal tax refund will cover an annual premium with cash to spare. The state has a below-average uninsured motorist rate and a moderate vehicle theft rate, which may help keep premiums lower. Rates have also stabilized in the last year, with Insurify projecting a modest 1.2% increase for 2026.
A few factors may push insurance premiums higher. Much of Oklahoma experiences frequent hailstorms and tornadoes, which can damage vehicles and increase the number of comprehensive claims. Oklahoma is also one of 10 states with 80 mph or higher speed limits on rural interstate highways, increasing the risk of severe accidents and expensive collision claims.
7. Pennsylvania
Average annual cost of full-coverage car insurance: $1,860
Average federal tax refund amount: $2,083
Pennsylvania drivers pay below-average car insurance rates, despite several factors that can lead to higher costs. For example, Philadelphia ranks No. 5 worst in the world for traffic delays and congestion, according to INRIX. Elevated traffic levels can increase the risk of accidents, driving up claims costs and premiums.
But it’s not just urban-area factors influencing rates. Pennsylvania is among the states with the highest frequency of animal strike claims, according to the Highway Loss Data Institute.[13] In fact, eight of the 10 counties with the highest frequency of animal strike claims are in Pennsylvania, which could mean higher comprehensive coverage claim costs for insurers.
Auto insurance costs remain stable, however, and Insurify projects a minimal 0.4% rate increase in 2026.
8. Arizona
Average annual cost of full-coverage car insurance: $1,798
Average federal tax refund amount: $2,189
Arizona’s below-average car insurance costs mean drivers could cover an annual premium with the average federal tax refund and have cash left over for other expenses. The state has a below-average uninsured motorist rate and a moderate vehicle theft rate of 90.1 thefts per 100,000 people, which could contribute to the state’s lower average premiums.
But weather-related comprehensive claims may elevate car insurance costs in Arizona. Much of the state faces an increased risk of wildfires, inland flooding, and hailstorms, according to FEMA. Since comprehensive insurance covers vehicle damage from severe weather, more frequent events could raise costs. Insurify projects a small 0.8% increase in 2026.
9. Montana
Average annual cost of full-coverage car insurance: $1,798
Average federal tax refund amount: $1,974
Montana drivers pay below-average car insurance rates, but a lower average federal tax refund means it will just cover an annual policy. In all, Montana is a relatively low-risk state. The uninsured motorist rate is low at 7.2%, and the auto theft rate is also below average, at 65.8 thefts per 100,000 people. The state also faces few climate risks likely to cause severe vehicle damage.
Road danger may be higher on rural highways. Montana is among the 10 states with a speed limit of 80 mph or more on rural interstates. It also has among the highest frequencies of animal strike claims, according to IIHS. But with no major factors driving increases, Insurify projects a 0.3% rate decrease in 2026.
10. Illinois
Average annual cost of full-coverage car insurance: $1,786
Average federal tax refund amount: $2,284
The average federal tax refund easily covers the average annual cost of car insurance in Illinois. Drivers pay below-average rates, but Insurify projects a small 0.4% increase in 2026.
Urban area drivers may see higher rates, however. Chicago has some of the worst traffic congestion in the world, and INRIX ranked it first among the cities with the highest traffic delay times in the Americas. On a global scale, Chicago ranks second behind Istanbul, Turkey, for the highest traffic delay times.
Dense traffic can lead to accidents and more frequent collision claims, driving up premiums. The state’s high vehicle theft rate may also contribute to higher costs.
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