A car insurance surcharge is any added fee that your insurance company attaches to your monthly premium. Usually temporary, these fees usually come after you’ve done something the insurance company considers to increase your risk as a driver, such as an accident where you were found to be at fault.
When you’re already paying a monthly premium for your insurance, you want to avoid letting it cause an even greater impact to your budget by tacking on an additional surcharge if possible.
Here’s everything you need to know about car insurance surcharges, why they occur, and how you can successfully avoid them.
Car Insurance Surcharge Definition
Anytime your insurance premiums are temporarily raised in order to penalize you for some action or inaction relating to your insurance, you’ve received a car insurance surcharge. Car insurance surcharges are financial penalties that insurance agencies use to offset the cost associated with your coverage— usually when you’ve had an at-fault accident or you’ve filed what they consider to be an excessive number of covered claims.
Other factors can lead to car insurance surcharges, too, such as traffic tickets or lapses in coverage.
Basically, anytime you do something that leads your insurer to consider you riskier to insure, you can probably expect to receive an insurance surcharge tacked on to your monthly premium in the near future.
How Car Insurance Surcharges Work
If a car insurance company pays out more to you in covered losses than they make back from your monthly premiums, then they’re experiencing a financial loss from your policy. Since nearly all insurance companies are businesses rather than nonprofits, they need to find a way to shift the balance so that risky drivers who file more claims also pay higher premiums to make up for them.
Enter car insurance surcharges, which are a quick way for insurance companies to recoup some of the costs that have come from insuring a riskier driver.
In some cases, companies use an automated system to assess driver risk and determine whether a surcharge should be added, and how much. In other cases, employees assess drivers on a case-by-case basis. For each customer and potential customer, insurers put together a ‘customer profile’ that they use to assess how risky that person is likely to be as a driver. Do all people who meet certain criteria have more accidents and file more claims? Of course not. Teenagers, for example, are considered higher risk drivers— but many never have an at-fault accident. Insurance companies are simply in the business of weighing risk versus profit when choosing whether to insure each individual.
What Causes a Car Insurance Surcharge
No one wants to have their monthly insurance premiums go up thanks to a surcharge. But how can you avoid them? Some factors that boost insurance rates are outside of your control, such as your age, time spent in total as a licensed driver, and where you live. But there are other factors that come into play that you can generally avoid by being a safe, responsible, and aware driver. Driving safely doesn’t just save your life— it can also save you a significant amount of money.
Causing Damage to Someone’s Property
If your actions while behind the wheel cause damage to someone else’s property, including mailboxes, buildings and structures, or other possessions, and you submit a claim through your insurance, you can probably expect a car insurance surcharge to appear on your next insurance billing statement. This isn’t always the case, but causing property damage is one of the most common reasons for added surcharges.
Causing a Collision with Another Driver
If you’re involved in a collision with another driver in another vehicle, and you’re found to be at fault, you may find yourself looking at an added surcharge on your monthly insurance premium. While your rates may not rise during the current period (usually six months), they may rise when it comes time to renew your policy.
There are exceptions to this. Some insurers offer various versions of what’s called ‘accident forgiveness,’ where first-time collisions won’t result in a rate hike. Other insurers will take into account loyalty when determining rates. If you are involved in an at-fault collision and submit a claim, but you’ve been covered by the same insurer for ten years, they may let it slide without increasing your premiums right away.
Causing Bodily Injury to Someone
If you’re responsible for an accident that’s severe enough that it causes enough bodily harm to a 3rd party that they need medical treatment, you will likely be hit with a car insurance surcharge on your next billing cycle. This is particularly true considering that medical payouts from insurance companies can be substantial, so your insurer will likely be looking to offset some of those costs.
How to Avoid a Car Insurance Surcharge
The rules for the implementation of surcharges vary from state to state. For example, in Massachusetts, you’ll only experience a surcharge if you submit a claim over $1,000 for an accident when you’re found to be more than 50% at fault legally.
The best way to avoid car insurance surcharges? Avoid accidents by being a defensive driver and making safe choices while on the road. That’s the best and simplest way to keep your insurance rates down and your personal and financial safety intact.
Conclusion
Looking for more information about car insurance, including whether you’ll have a car insurance surcharge and other specific needs? Freedom National is deeply experienced with providing non-car owners with insurance policies to suit their unique needs. You’ll find everything you need to create the perfect policy for you thanks to our fast online quote form, where you can provide details about your insurance needs and receive a quote in minutes. And because we work with a wide network of insurers, you can be assured that you’re getting the best possible rate.
Our simple process lets you fill out a quote in minutes, learn more about car insurance and common car insurance terms, and get covered right away with a customized policy just for your unique needs.
