A surcharge is an extra charge applied by your insurer that will raise your total premium; it’s usually because you have demonstrated some behavior that shows you to be more of a risk to your car insurance company.
For car insurance, a surcharge will normally be applied for items such as:
- Moving violations, such as speeding tickets
- Risks not handled by normal rating factors
The most common surcharges result from something you’ve done as a driver. Having an at-fault accident, being involved in auto accidents or making several car insurance claims are all events that typically may be surcharged by car insurance companies.
Traffic violation convictions, from speeding to a DUI, can also be surcharged. The severity of the violation will determine the severity of your surcharge.
For example, some insurance companies levy a surcharge on brand-new drivers or drivers with fewer than 10 years of experience.
Surchargeable or chargeable accidents
You’ll often hear surcharges being discussed in how they relate to accidents. When an insurance company determines you’re at fault for an accident, it calls that a “chargeable accident” and will tack a surcharge onto your rate, meaning it increases what you pay.
In some states, a chargeable accident is defined by the claim amount. In Massachusetts, for example, a surcharge applies if you are more than 50% at fault and the accident claim is over $1,000 for:
- damage to someone else’s property
- a collision with another driver
- bodily injury to others
Car insurance surcharges don’t last forever
The good news is that if you receive a surcharge, it doesn’t last forever. Surcharges can only affect your rates for a limited number of years. The number of years varies according to state law. Or, if the state doesn’t dictate the time period, it’s decided by the internal guidelines of the individual car insurance company.
Many car insurance companies will surcharge you for only three years. However, if the state allows, there are auto insurers that will continue a surcharge for five to seven years.
The surcharge amount may stay the same or be reduced over time.
For example, one company may charge you a 60% surcharge for a major violation the first year, 30% the second and 15% the third and final year of the surcharge. Another car insurance company may charge you a 40% surcharge for all three years.
Car insurance companies’ surcharges shouldn’t be excessive. To protect consumers against unreasonable surcharges, auto insurers must file their surcharge schedules with the state’s insurance regulator for approval.
In some states, your surcharge schedule must accompany your policy; however, in many states, you must request a copy from your insurance company.
— Penny Gusner contributed to this story.