Car Insurance Surcharge Definition & Examples
An auto insurance surcharge is an additional amount or a penalty that is added to your insurance premium.
Usually, it’s the result of a traffic violation or an accident.
Find out what can cause an auto insurance surcharge, how long it lasts, and what you can do to decrease the cost of your insurance.
Exactly what is a car insurance surcharge?
Surcharges for car insurance are temporary increases in the monthly premiums that are assessed as a penalty. It is most commonly caused by something within your control, such as an accident or an excessive number of claims. In addition, a traffic ticket is also a common cause of surcharges.
A driver who has committed moving violations and received tickets is a higher risk from the insurance company’s perspective. These drivers are more likely to file insurance claims.
As a result, the company temporarily adds a surcharge to your monthly premium until you prove that you are no longer a high-risk customer.
Here's how car insurance surcharges work
Insurance companies charge surcharges as a way of recovering the additional expenses that they incur for handling your claim.
Extra costs can arise from various reasons, such as claims payouts or administrative expenses.
- At-fault accidents
- Payment delayed
- State fees
- Lapses in coverage
- Traffic violations
A majority of insurance carriers review your driving record when you purchase the policy and when you renew it. Behaviors that may increase the risk of insuring you, such as speeding tickets, reckless driving, or driving under the influence of alcohol/drugs, are recorded in a customer profile.
It is important to remember that an insurer will also give consideration to any claims filed in order to determine whether a surcharge is warranted.
The surcharge may be automatically applied if the insurer has an automated system. Sometimes the company chooses to charge a surcharge or not. Depending on the type of violation, the surcharge will stay for different periods of time.
Note : Here are some suggestions to help you reduce your car insurance surcharges Premiums paid on time:
- Avoid speeding tickets, accidents, and other moving violations
- Never let your car insurance lapse
- Paying for small at-fault accidents yourself, instead of filing a claim
There are a variety of different surcharges that apply to your car insurance depending on the policy rules of your insurer as well as what triggered the penalty. The extra charge usually lasts for three to five years, and your insurance premium will return to normal after that period.
Car insurance surcharge - do I need it?
Whenever you suspect that there have been surcharges on your car insurance policy that have been dropped or should not have been applied to your account, contact your insurance agent to ask about this.
If you have a clean driving record and few or no violations on your record, you can try to have the surcharge removed. There are some states where it is illegal for insurance companies to waive surcharges or fees after they have already been assessed without a change in circumstances.
For example, the driver who had the accident may no longer be covered by the policy.
In addition, you should keep in mind that:
Insurance companies and you can’t control a state-mandated fee. In no-fault states, you are often required to pay extra for medical coverage, and many states assess fees after you have accumulated a certain number of points on your driving record. The fees are commonly referred to as surcharges.
If the company keeps the surcharge, then you’ll have to:
- Get insurance from another company that is less expensive
- Pay the full amount of the premium, including the surcharge
Penalties: What are they?
When you fail to pay your car insurance premiums, including any surcharges, your policy may lapse and leave you without insurance.
There are some states in which you will lose your driver’s license if you are not able to pay a surcharge assessed by your state government (often referred to as an SR-22 or Certificate of Financial Responsibility filing), making it illegal for you to drive until you have paid the surcharge.
Then, as part of the restoration process, you will be required to pay any surcharges and fees owed, including any license restoration fees.
What are the alternatives to a car insurance surcharge?
If your car insurance premium goes up, it is likely due to a rate hike rather than a surcharge.
The rate hike isn’t a temporary penalty or increase, like a surcharge. This is a fixed increase in your premium for your insurance. Sometimes, these are the result of insurance companies raising prices and are applicable to all policyholders.
Advice:
A large number of companies look at your credit score before setting your auto insurance premium. Improving your credit score can help you lower the price of your auto insurance.
You may face a rate hike due to a change in your circumstances, such as:
- Adding a teen driver to your policy
- If you move to an area that has extreme weather, heavy traffic, or other factors that make accidents more likely
- The decision to upgrade to a more expensive car
Call your insurance company if you are confused about why your insurance premium has gone up and can’t determine whether it is due to a surcharge or a rate increase.
Representatives should be able to explain charges and their cause