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.
A surcharge is the opposite of a discount, which helps lower car insurance rates. Both surcharges and discounts should be listed on the declarations page of your car insurance policy.
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.
Sometimes you haven’t done anything wrong yourself, but you fall into a category that isn’t considered by the company’s standard rating factors. For example, some insurance companies levy a surcharge on brand-new drivers or drivers with fewer than 10 years of experience.
These are examples because surcharges vary from one insurance company to the next unless you live in North Carolina, where there is a set surcharge schedule.
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 amount of the claim. 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
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 amount of a surcharge 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 then only 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 give consumers some protection against unreasonable surcharges, auto insurers must file their surcharge schedules with the state’s insurance regulator and have them approved.
In some states, your surcharge schedule must accompany your policy; however, in many states to get a copy you have to request a copy from your car insurance company.
Consumers should know not only about discounts, which insurers proudly display on their websites but also the surcharges drivers could receive. It would be a great consumer service for insurance regulator sites to place surcharge schedules online just as some already post policy examples and comparison rate charts.
— Penny Gusner contributed to this story.